Abstract

Disintermediation as a Result of Microbonds

Companies being newcomers in the capital market that seek to mobilise liquid funds by way of microbonds face substantial market resistance in the German financial system, which is characterised by traditional bank intermediation. The question whether such microbonds would lead to disintermediation depends on the reputation of the respective issuers as well as on a targeted use of the financial marketing mix. In this context, recent microbond issues suggest the pursuit of product and pricing policies focusing on nominal rates of interest. Their seemingly attractive rates of interest are meant to compensate borrowers for being exposed to substantial uncertainties that stem not so much from the risk of issuer default, but from reduced marketability and issuer-side callability. Thus, it is especially the corresponding callability spread that is calculated using models that are used for Bermudan options and explains large parts of the microbond spread compared with the risk free market interest rate. The remaining gap owes its existence both to the (missing) reputation of issuers and to overestimated market obstacles (miscalculation spread). Not only placement successes to-date, but also the innovative pricing policy approaches in the form of product-based interest generation that have been analysed to round off the picture suggest the existence of a certain potential of disintermediation as a result of microbonds.