Brexit

The City of London has faced up to — and seen off — European challenges before, most notably the launch of the single European currency. But as Philip Moore reports, it’s not just Brexit that the Square Mile should be afraid of.

The UK’s largest lenders may be operating in one of the developed world’s only growing economies, but an exit from the European Union could be about to turn their world upside down. Tom Porter reports.

The UK’s June referendum on European Union membership may be grabbing the public’s attention, but in the background the country’s Debt Management Office has been quietly and efficiently raising the big sums of cash that have been the norm since the 2008 financial crisis. Of far more interest to Gilt market participants is the split between syndications and auctions in the DMO’s funding programme and the effect regulation is having on banks’ ability to provide liquidity — a concern that the UK market is far from alone in having to address. GlobalCapital brought together representatives from the UK DMO, Gilt-edged market makers and the investor community in the lofty surroundings of London’s Tower Bridge to discuss those issues, as well as idiosyncratic features of the UK market, such as the argument for creating Gilts linked to the Consumer Price Index (CPI), rather than the older Retail Prices Index (RPI). The DMO also shared the latest news on its review into the provision of Gilt and Treasury bill reference prices — on which banks and investors expressed their views.

The pity of the uncertainty and volatility caused either directly or indirectly by the upcoming referendum is that it comes at a time when, after a number of false dawns, the UK economic recovery appeared to be gathering some staying power, reports Philip Moore.

“I’m not going to let that stand,” said Bank of England governor Mark Carney, calmly.

Yankee FIG issuers continued their return to the high grade dollar market this week as investors snapped up new issues from a variety of names.

Bank of England governor Mark Carney confirmed to the UK parliament on Tuesday what currency traders and analysts have been saying for weeks: worries about the EU referendum are sending prices higher for sterling options and raising the risk of a sharp fall in the pound.

Bank of England governor Mark Carney confirmed to the UK parliament on Tuesday what currency traders and analysts have been saying for weeks: worries about the EU referendum are causing higher prices for sterling options and raising the risk of a sharp fall in the pound.

The Bank of England has printed $2bn of three year paper from a heavily oversubscribed book, as fears of a UK exit from the European Union showed no impact on the central bank’s bonds.

A record breaking start to the year for SSA issuance in sterling kept pace this week, as the bond market showed little sign of contagion from a drop in the currency to a seven year low versus the dollar — and indeed may even have received a boost from the devalued currency.

Senior capital markets bankers are preparing their teams for months of speculation on Britain’s possible exit from the European Union, after the markets treated them to a glimpse of investors’ uncertainty on the issue this week.

A merger between London Stock Exchange Group and Deutsche Börse could bring huge cost savings and margin benefits — but would concentrate clearing house risk, running directly against the regulatory desire to end "too big to fail".