"It's not quite a one-horse race yet, but it is starting to look like a procession.' That was the comment from one syndicate manager at a rival US investment bank after Merrill Lynch simply lengthened its stride in the final 200 metres to become the top new issue bond house for the sixth consecutive year. Merrill is now threatening the record of Credit Suisse First Boston, which dominated the Euromarkets between 1979 and 1986.

However, Merrill didn't have an easy victory in 1999. At various points during the year Morgan Stanley, Salomon Smith Barney and Deutsche Bank led the field. At the end of November, as I mentioned in these columns, Morgan Stanley was within a whisker of topping Merrill from its primary market throne. My friends at Morgan Stanley believed they finally had the measure of Merrill having come frustratingly close on two occasions. My friends at Merrill Lynch said that they weren't especially concerned about Stanley, but that the house to watch in 2000 is Salomon Smith Barney. To be the top new issue house in one of the world's most competitive markets for six years isn't a matter of luck. Since 1993, when Goldman Sachs surprisingly won the blue riband, Merrill was always the house that the others had to catch. CSFB had given up its Euromarket crown without much of a struggle and was making hundreds of millions of dollars in emerging markets and derivatives. Deutsche Bank was always there or thereabouts, but in 1993 it didn't have Edson Mitchell as a leader. Salomon Brothers, like Goldman Sachs, was about to have an annus horribilis in 1994. Six years ago, would you believe that Merrill's major competitive threat was perceived to come from JP Morgan? What were the secrets behind the Merrill success story? Substantial credit should be given to Merrill's former chief executive Dan Tully who began to totally restructure the company in 1989. Simply by introducing global product lines and global reporting lines, Merrill turned from being a Thirsk or Redcar selling-plater into a Derby winner. Merrill also had good bond managers. The expertise of Edson Mitchell, Seth Waugh and Jimmy Quigley in New York was complemented in London by Connie Voldstad, John McNiven and David Tory. Merrill's New York syndicate desk supplied London and vice versa. Within two years, Merrill was the leading new issue house in debt capital markets on both sides of the Atlantic. But success in the primary market was only part of Merrill's strategy. The company also invested heavily in secondary market trading, sales and research. Within a very short period Merrill could argue with prospective borrowers that, based on its distribution capability alone (especially into the huge US market), they should be a member of almost every lead management group. Time after time Merrill was voted the best house in secondary market trading, credit research and economic forecasting. "Every hand they played started with three of a kind,' commented one envious competitor. At the beginning of 1999, however, Merrill, for once, looked uncharacteristically vulnerable. A combination of major losses in Russia and extensive exposure to John Meriwether's Long-Term Capital Management had left the debt capital markets division reeling. Fixed income became a scapegoat. In an unnecessarily harsh purge, more than a dozen senior executives, including several managing directors, were either dismissed or pushed aside. Merrill's bond group in January 1999 was in disarray. Not only was New York, formerly the cornerstone of the awesome Merrill bond machine, in turmoil but in London the company was caught flat-footed with the arrival of the new euro currency. I wasn't in the least surprised when Deutsche Bank, with all of its euro skittles in line, raced into an early lead.Merrill needed urgent direction and congratulations are due to Kelly Martin who placed his hand firmly on the tiller and cleverly guided Merrill through a year in which the firm might easily have lost its way. Don't believe that Martin had an easy passage. He had been given the top day-to-day fixed-income position at Merrill in late 1998 after Herb Allison carried out his "night of the long knives' cleansing of the bond group. Martin was seen as Allison's man. Allison himself was to be thrown to the wolves in the late summer. Within Merrill, Martin was not always seen as the natural choice to head the huge fixed-income group which had always been one of Merrill's most consistently reliable revenue sources. Martin was much less flamboyant than Edson Mitchell had been in New York or Connie Voldstad and John McNiven (whose Rolls-Royce had a MCNIV personalised number plate) in London. The question which everyone in the Euromarkets was asking at the beginning of the year was: "Does Kelly Martin have the strength of character to keep Merrill at the top when the opposition is waiting for him to make the slightest error?' Twelve months later, Martin answered his critics in the best way possible by leading Merrill to the number one position in both US domestic and international debt lead-managements. For those achievements he deserves to be voted individual manager of the year. In the international sector his nearest rival would be Jim Forese of Salomon Smith Barney who orchestrated SSB's stunning Euromarkets revival in 1999. I can only hope that Merrill's executive committee rewarded Kelly Martin's performance as handsomely as Salomon's Forese, who is reputed to have received a bonus which could buy the whole of Wales or at least one small county in Scotland. Where does Merrill go from here? "It's always a bitch being number one because you can only go down,' said a Goldman Sachs M&A specialist who knows the feeling. I suspect that the understated Kelly Martin and his key executives are not particularly concerned and after six in a row the bookmakers are already laying odds on a seventh victory. Who are the most dangerous challengers? The Merrill team themselves might fancy the chances of Salomon Smith Barney which is still celebrating its performance last year. Salomon specialises in very large US dollar global issues and is particularly strong in US corporates. With Citigroup's balance sheet and a client list which has not yet been fully tapped, SSB is widely considered to be a house to watch. Don't, however, rule out Morgan Stanley which had a stunning all-round year in 1999 and believes, with some justification, that it has overtaken Goldman Sachs to become the best investment bank in the world. Stanley's M&A expertise alone will guarantee a flow of major debt financings for its predatory corporate clients. Could this finally be Deutsche Bank's year? Nothing would give Deutsche's Edson Mitchell more pleasure than cocking a snook at his former Merrill Lynch colleagues. Mitchell is regarded as one of the most charismatic and successful leaders in the Euromarkets, but is he dealing himself from a pack which is short of one ace? In the crucial US domestic market Deutsche isn't winning the major corporate mandates which become global debt offerings and isn't a regular lead manager for the US government agencies. That business is still dominated by the five US bulge-bracket houses. Mitchell has to crack open that source because if he could add US supply to his predominant position in euros, Deutsche could sweep the board. In the meantime, he will have to hope that the euro as an issue currency increases its market share versus the US dollar. According to the bookmakers, those are the four Euromarket houses which are expected to dominate the new issue market in bonds in a year which has got off to a flying start. Look at the betting with Merrill the favourite at 5-2, Salomon Smith Barney 7-2, Morgan Stanley 5-1, Deutsche 8-1 and CSFB and Goldman Sachs 10-1. Who fancies an early flutter?