UK

Sterling is set to take a bigger slice of the socially responsible bond market as a result of a number of initiatives, including reforms that are putting the pressure on UK pension funds to focus on environmental, social or governance (ESG) factors in their investments. Burhan Khadbai reports

Covered bonds performed well in 2019, but yields finished in negative territory and spreads ended at their tightest for the year. The implication is that, despite higher than expected ECB covered bond purchases and a renewal of its ultra-cheap TLTRO facility, investors will struggle to match 2019’s returns in 2020, writes Bill Thornhill.

Navigating the covered bond market will not be without its challenges in 2020. The Targeted Longer Term Refinancing Operation (TLTRO), European Central Bank deposit tiering and the Covered Bond Purchase Programme have collectively distorted the market, but added to this concoction is the impact of negative interest rates. Against this backdrop issuers, investors and investment bankers gathered in Munich in November to discuss the outlook for covered bonds. It is likely that new issue premiums will gradually tighten, but the path is unlikely to be smooth. January is typically the busiest month, but in 2019, issuers that funded this early paid the highest spreads. And, with the ECB expected to buy in the region of €4.5bn covered bonds a month, issuers will not feel compelled to move early. But the ECB monetary policy has unwelcome implications. Covered bonds have begun to lose value against government bonds, and this will extend if the ECB is unable to loosen restrictions on government bond purchases.

It was a year when the corporate bond market first had to get used to a world without QE — and then digest its return. Spreads tightened sharply after the summer following the ECB’s decision to restart its Corporate Sector Purchase Programme. But that did not mean all the best deals came after September. Far from it.

A rich variety of UK borrowers including a football club, two airports, the City and a clutch of FTSE 250 firms turned to US private placements in 2019. UK local authorities remained absent, but a surprise from the UK Treasury in October may be a game-changer

Markets go into 2020 fretting about a global recession and an escalation of tradetensions between the US and China, according to 25 heads of debt capital markets in the EMEA market, in Toby Fildes’ annual outlook survey. Respondents are mildly pessimistic on spreads and fees in the primary markets as well. But on the plus side, bankers are feeling hopeful about sustainability-themed bonds and almost unanimously believe issuance will top $270bn.

For corporate treasurers, the rates markets’ transition away from Libor and other Ibor benchmarks has created a messy future for their derivatives portfolios that many would prefer not to think about. Uncertain liquidity in new products and having to understand volatility in the new benchmarks are complicating the migration but there are signs of progress amid the confusion, writes Ross Lancaster.

Equities are at record highs, rates at record lows; the US is quarrelling, China is slowing. As 2020 begins, participants are divided on which way markets will move. Toby Fildes picks 10 themes

The transition from one set of interest rate benchmarks to another is conceptually simple. But it is also unprecedented and has deeper consequences than many realised when Libor’s abolition was announced in 2017. With contracts worth hundreds of trillions of dollars referencing the disgraced benchmark, even small errors will have vast repercussions. PPI mis-selling? You ain’t seen nothing yet. Richard Kemmish reports

Increasingly divisive and unpredictable UK politics is threatening the favourable conditions on which private equity firms and the leveraged finance industry have relied during the post-crisis years. Most levfin bankers and PE partners breathed a great sigh of relief on Friday morning, when the risk of a Jeremy Corbyn-led government dissipated and no deal Brexit became far-fetched — but uncertainty over Brexit remains. Karoliina Liimatainen reports.

Kunal Gandhi, the head of corporate broking at Barclays, has left the bank, GlobalCapital understands.

Sprawling e-commerce company The Hut Group completed a €600m term loan 'B' deal on Tuesday, changing its capital structure. The privately held company — touted as one of the few UK tech unicorns — has expansion ambitions in both online stores and web services, but is also making risky excursions into real estate.