UK
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The era of monetary stimulus has become a parade of diminishing returns that cannot continue if health is to return to the global economy.
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The Bank of England sent the sterling corporate bond market down the path of monetary distortion this Thursday as it resurrected quantitative easing, including the asset class on its target list. Ross Lancaster reports. -
It was a tale of two interventions this week, as Japan underwhelmed markets with its stimulus plan while the Bank of England delivered more than expected, in moves that also sent the yen and pound reeling in different directions.
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A bigger than expected push towards monetary easing by the Bank of England on Thursday sent Gilt yields to new record lows, but unfavourable basis swap rates and a rampant dollar market means an uptick in arbitrage funding in sterling by public sector borrowers is unlikely, said bankers.
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The Bank of England doesn’t often follow the European Central Bank. During the financial crisis and its aftermath, the Bank was quick to cut interest rates and implement quantitative easing. The ECB was still raising rates in July 2008, and didn’t start QE until 2015.
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Sterling corporate issuers stood ready to take a lump out of their costs of funding on Thursday after the Bank of England announced a £10bn bond buying programme targeting their market.
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Energias de Portugal made an opportunistic grab for euros on Thursday, proving that even as August begins, healthy order books and negative new issue premiums are still available for corporate bond issuers.
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Vitec, the UK supplier of equipment to the broadcasting and photography industries, has refinanced its £125m credit facility, replacing one bank in the syndicate.
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The UK’s Prudential Regulatory Authority has offered the nation’s banks a chance to temporarily free up some capital now used to comply with the leverage ratio requirement.
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Auto-parts business Adient on Thursday started pricing a $2bn cross-border bond, attracting high demand for a deal that could be the last high yield offering before the European market breaks for the summer.
