Investors forfeit new issue premiums for BoE-eligible paper

Thu Sep 29, 2016 8:34am EDT
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* 2 BoE-eligible corporates hit sterling market

* Northumbrian Water could price inside curve

* BoE to publish purchases from next week

By Tom Porter

LONDON, Sept 29 (IFR) - Two companies with bonds eligible for the Bank of England's purchase programme hit the market on Thursday, giving sterling investors another chance to bet on monetary policy-fuelled secondary performance.

The central bank has been purchasing investment-grade corporate bonds in the secondary market since Tuesday, as it looks to buy up to £10bn over the next 18 months via reverse auctions held every Tuesday, Wednesday and Friday.

Northumbrian Water and Deutsche Telekom, whose outstanding sterling bonds are on the eligible list published on September 12, both launched new trades in the currency on Thursday.

The pair of BoE-eligible trades come shortly after BASF priced the first such deal on Wednesday, a £250m seven-year sold at Gilts plus 67bp.

Northumbrian Water looks set to price the new deal inside where its existing bonds are trading, with DT offering virtually no premium, suggesting buyers are banking on the BoE sending spreads even tighter.   Continued...