UK Sovereign

The UK Debt Management Office has chosen the tenor for the final syndication of its 2018-2019 financial year.

The deal agreed by Theresa May, prime minister, for the UK's exit from the European Union has brought issuance of sterling bonds, equity and loans to a juddering halt, which could extend into 2019. Nigel Owen reports.

The public sector market for sterling benchmark issues has shut down earlier than usual as a result of a plunge in Gilt yields — caused by concerns surrounding the UK’s exit from the European Union — which has made new issues unattractive for investors.

Gilt investors and Gilt-edged market makers (GEMMs) were near unanimous in their choice for the UK Debt Management Office’s final syndication of the year.

Public sector borrowers are likely to be the only beneficiaries from the fresh bout of Brexit inspired volatility that hit markets this week, said bankers. A Gilt auction that came at the height of the disruption served to bolster that case.

A large UK council has held discussions with a selection of US private placement (US PP) arrangers over the possibility of raising more than £200m in a single issue, according to a senior banker familiar with the situation.

An unfortunately timed Gilt auction recorded the highest yield tail — an indicator typically inversely proportional to an auction’s perceived success — in nearly a decade on Thursday, as several UK government ministers resigned over the draft Brexit agreement with the EU. But SSA bankers said that while the tail was “optically” bad, the wider context meant the Gilt sale had been a success.

BNP Paribas, Crédit Agricole and Société Générale are making plans for the eventuality of a hard Brexit, in some cases putting swathes of bankers at risk of redundancy. Some DCM and sales teams have been asked to move, though each bank is taking a different approach as to who will need to be relocated to comply with EU regulations.

Barclays’ co-head of global debt capital markets and risk solutions group has had his job put at risk by the bank.

BNP Paribas has told between 80 and 90 London-based people in its global markets division that they may need to relocate to the EU in the event of a hard Brexit.

The UK's buyer base has welcomed a reduction in Gilt sales for this financial year, but have warned of economic pressure from the UK’s negotiations to exit the European Union.

The European Bank for Reconstruction and Development returned to the sterling market on Tuesday to sell the first benchmark of its 2019 funding programme.