UK
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The corporate sterling bond market, mired in Brexit angst for much of the year, has burst back to strength this week as it beat the euro market on pricing and won the attention of international issuers and investors. Ross Lancaster reports. -
Tullett Prebon has extended its land grab in hybrid voice brokerage across trading classes, with a foreign exchange platform launch this week adding to recent manoeuvres in other areas such as rates and credit derivatives.
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Dovish actions taken by the Bank of England last week, particularly its sterling corporate bond buying programme, helped send short dated credit and equity implied volatility near to their post-crisis lows, prompting traders to begin to roll out of short volatility trades and size up potential bumps in September.
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Banks are gearing up to reverse a disappointing year for additional tier one bond issuance. Royal Bank of Scotland and Standard Chartered led the charge this week, and there may be no stopping the turnaround as prices rise and greater regulatory clarity puts investors' minds at ease.
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The rally in sterling covered bonds still has some way to go. With another UK rate cut likely and negligible supply, spreads should at least halve in the next few months.
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The Bank of England’s Gilt buying programme ran into difficulties on Tuesday, securing only £1.12bn — £50m short of its target — despite offering to pay well over market value.
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Starwood European Real Estate Finance, the Guernsey domiciled closed-end investment fund focused on real estate debt, has completed a £73m ($94.78m) share placement on the London Stock Exchange.
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With sterling spreads tightening and foreign investors showing increasing interest, both HSBC and BNP Paribas looked to take advantage of funding opportunities in the UK bond market this week.
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After Shell printed its €2.25bn dual tranche bond on Wednesday, market participants are expecting an empty two weeks for issuance, before activity restarts at the end of August. That’s for euro houses though. Those banks with sterling operations are enjoying the fruits of Bank of England governor, Mark Carney’s anticipated corporate QE programme, which has accelerated pricing compression in the market. Sterling deal flow can keep pace throughout August it is hoped.
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Sterling bond yields may be sinking but that has rekindled investor demand for UK bond exchange traded funds at the expense of Gilts, according to IHS Markit.
