Paul Hawkins has 29 years of experience in financial services, the majority of that trading and managing credit trading businesses at companies including RBS, Barclays, Santander, and now Mizuho. We spoke to him about his experience, the current state of the market, and what success looks like to him at Mizuho.
After graduating with a degree in Geography, Hawkins spotted an advert for a private client stockbroker role in Liverpool that would ultimately pave the way for the rest of his career.
“I fell in love with it straight away,” he explains. “I realised that this is what I wanted to do and I started applying for Graduate roles in London.”
"I was part of a business from a standing start, and it became utterly dominant in the market – it was the go-to sterling house on the street."
Paul Hawkins,
Head of Sterling Trading
In 1998, Hawkins moved to London and was accepted on to the Graduate scheme at RBS, and trained under four partners who were in the process of setting up a sterling credit trading business from scratch.
“I didn’t realise how significant it was at the time, but I was part of that business from a standing start, and it became utterly dominant in the market – it was the go-to sterling house on the street.”
As that business continued to grow, so did Hawkins career, and by 2007 he was the Head of Sterling Credit Trading at RBS.
After over a decade at RBS, Hawkins moved to Barclays during the eye of the great financial crisis, where he helped them reinvigorate their already dominant sterling business as well as run their Asset-backed securities trading, commercial paper trading and Euro cash trading.
“It was a very exciting time,” states Hawkins. “I was also invited to the Bank of England to help design the quantitative easing element of the asset purchase facility that was established in 2009.”
Since then, Hawkins has gone on to hold roles at Santander as their Head of UK Credit Trading & Sales, as well as set up his own asset management business that focusses largely on sterling corporate bonds.
The Sterling Credit Trading Market
As global interest rates continue to rise, the yield in UK credit instruments has become more attractive to both domestic and international investors. Whilst issuance in the sterling credit market has not suffered materially as a result of gilt yields rising rapidly of late, Hawkins says that as long as corporates and supra-national agencies see the value in issuing bonds into the sterling market, the secondary market will continue to flourish.
“Sterling is still a major currency and Mizuho is here in London, a global financial capital, of which sterling is the currency. So, there is a natural gravity of activity around sterling bonds and sterling issuance here,” explains Hawkins.
"The sterling credit market offers attractive yield opportunities for investors at the moment."
Paul Hawkins,
Head of Sterling Trading
He continues, “the sterling credit market offers attractive yield opportunities for investors at the moment, because gilt yields have increased markedly in recent times, and this is a spread product based off the government bond yield.”
Hawkins says that UK pension funds, asset managers and now hedge funds that make up the major players, but other demand drivers are central banks and banks themselves.
“The reality is that the pension fund industry is very significant in the UK, driven by legislative factors, which means that there's an ongoing demand from annuity-based buyers, which are pension funds.”
Mizuho’s Sterling Credit Trading business
“My background has always involved starting-up or reinvigorating a business. So, when I got the call from Mizuho it was of real interest to me,” says Hawkins, Head of Sterling Trading, Mizuho EMEA. “Mizuho has the balance sheet, brand and credibility and therefore it has a reason to exist as a sterling market making business.”
Hawkins, who has nearly three decades experience in sterling credit trading says that the current market is akin to that which he joined in the late 90s after a period of ultra-low rates. He notes it’s ironic that some of the biggest issuers from that time such as Hammerson, Sainsbury and British Telecom continue to be relevant issuers all these years later.
On the cyclicality which persists in the market, Hawkins explains that you have to have presence in the market for a long time to garner that experience, it’s not just something anyone can come in to due to the very idiosyncratic nature of the sterling market vs other credit markets.
“I have experience of what a full cycle looks like, and I have the war wounds to know how a crisis plays out. It’s never pleasant at the time, but I know what it looks like for a business, and I know what sterling investors will do in that situation.”
“Sterling is traditionally a market where you need to specialise to be successful. It’s got its own unique characteristics and whilst the market has many banks who pay lip service that they are active in the sterling market, there are only a few real stalwarts,” summarises Hawkins.
"We must be a consistent liquidity provider through the cycle and earn those calls from the sterling investment community."
Paul Hawkins,
Head of Sterling Trading
When asked what he and his team are looking to achieve at Mizuho, Hawkins says that it’s about delivering consistency to clients’ day in day out, at the same time as teaching them that Mizuho will not be a wasted call. It’s not a quick process, but gradually over time clients will come to see Mizuho as a natural call. Also, to succeed he appreciates that there needs to be a symbiotic relationship with the primary business.
“There’s a lot of primary sterling mandates going around, which can be a profitable business for the banks winning those mandates. A relevant secondary business is essential for primary market success. Relevance in secondary facilitates primary fees, which in turn ensures clients will naturally gravitate their business towards secondary. Success begets success!”
“This is the crux of what we’re trying to do,” he summarises. “We must be a consistent liquidity provider through the cycle and earn those calls from the sterling investment community. The reality is that you earn the right to exist, you don’t demand it – success is a profitable, credible long-term business.”