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Nine banks chosen to run £1.5bn borrowing programme
‘Notably better’ spread cements sovereign’s standing, thanks to triple-A rating and solid fiscal position
All as expected by the market, but lack of more details regarding bill issuance somewhat disappoints
◆ Sovereign back in euros, alternating from dollars in 2025 ◆ “Very low double digit” spread over Germany ◆ Sweden, KfW key comps
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An extraordinary demonstration of support from the US Federal Reserve over the weekend has done nothing to lift investors' spirits, with fears about the economic consequences of Covid-19 showing through in equities, credit and even the rates market on Monday morning. -
Governments and central banks failed to prevent fear from taking hold of the capital markets this week, as Covid-19 reached pandemic status. European equity indices faced record falls on Thursday, before the Federal Reserve Bank of New York announced a $500bn repo operation to combat "highly unusual disruptions" in the US Treasury market. But it is far from clear if such extraordinary intervention will be enough to stop the panic.
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Financial market participants were left wondering this week if what felt to many like a very vivid stress test had become a complete meltdown, as searing volatility puts all players into crisis preparation mode, write Ross Lancaster, Jon Hay, Max Adams and David Rothnie. Strains are appearing in places where they were not expected, such as the US Treasury market. But markets are continuing to function and some traders have enjoyed exceptional volume.
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ECB president Christine Lagarde used the meeting on Thursday to effectively distance herself from financial markets, saying 'we are not here to close spreads'. Despite a number of 'smart ideas', the absence of monetary promises have caused credit and peripheral spreads to widen.
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The UK has pledged £30bn ($37.62bn) of stimulus to cushion the coronavirus pandemic’s economic impact, and now the Debt Management Office’s remit is expected to be £40bn higher than last year. But the Budget, delivered by UK chancellor Rishi Sunak on Wednesday, seemed to have little effect on Gilt yields, despite rising on the day.
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The Bank of England’s unscheduled decision to cut rates and encourage banks to lend to the real economy on Wednesday morning was viewed as a powerful step by some in the market, although it is very unlikely to put to bed economic uncertainty over the impact of coronavirus.
