UK Sovereign

The looming threat of a no deal Brexit, as well as the chaos ensuing from the UK’s new stricter restrictions to combat Covid-19, caused Gilt yields to plunge on Monday morning. Unless EU and UK politicians are able to come to agreement on a trade deal soon, negative rates look almost inevitable.

As Boris Johnson embarks on a green industrial revolution, he has happened upon one of those rare moments when government policy seems completely aligned with investor appetite. The UK must use this capital markets sweet spot to transform its energy infrastructure next year and beyond.

Capital markets professionals are resigned to a no-deal Brexit, after UK prime minister Boris Johnson and EU Commission president Ursula von der Leyen failed to find a way through an impasse in trade negotiations over dinner on Wednesday. Equities are set to suffer the most, and the ability of UK companies hurt by Covid-19 to raise capital is now in serious doubt. Sam Kerr, Lewis McLellan and Mike Turner report.

The UK Debt Management Office has put out a request for green structuring advisers for the launch of its first green Gilt.

Bankers and investors are unconcerned by an inquiry by UK members of Parliament into the cost-effectiveness of syndicated Gilt issues.

The House of Commons' Treasury Select Committee has asked the UK Debt Management Office to answer a series of questions on its bond syndication programme, specifically on the pricing of its bonds and the fees it pays to bookrunners.

Building a UK green government bond market would take a minimum issuance of about £30bn and “some time” for the UK to establish a benchmark size for the market, according to the head of the UK Debt Management Office.

The UK Municipal Bonds Agency on Tuesday withdrew a planned bond sale for Warrington Borough Council as a result of the Public Works Loan Board’s decision last week to cut its lending rate by 100bp. Warrington will have to reconsider what is its best funding option.

In calls with the UK Debt Management Office on Monday, the majority of Gilt-edged Market Makers (GEMMs) and some Gilt investors called for the UK to launch a new conventional bond maturing in either 2046 or 2051 via syndication next month.

UK government borrowing is rocketing, with the country intending to borrow £485.5bn in its 2020/21 financial year. This has already pushed up its debt to GDP ratio over 100%, but the announcement of next quarter’s £92bn remit caused scarcely a ripple in the Gilts market on Wednesday. Market participants believe that any problems of debt sustainability or spiralling inflation are too distant a prospect to trouble them, writes Lewis McLellan.

The UK government said that it will not compensate holders of index-linked Gilts following the reform of the Retail Price Index (RPI) measure of inflation, which is expected to be enacted no earlier than 2030.

The UK government tightened guidance for local authority borrowing on Wednesday, in a bid to stymie the riskier borrowing-to-invest models certain UK councils have adopted over the past decade.