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Safest Sterling Bond Issuers Take Advantage of Nervous Investors Ahead of Brexit Vote

Emma Haslett
Safest Sterling Bond Issuers Take Advantage of Nervous Investors Ahead of Brexit Vote

(Bloomberg) -- Concerns about a potential no-deal Brexit are a boost for one corner of the sterling-bond market -- overseas sovereign agency sales.

The market has already seen 16 offerings totaling at least 7.65 billion pounds ($10 billion) from non-U.K. government agencies or supranational bodies, surpassing the total for the whole of January last year, according to data compiled by Bloomberg. The rush has largely offset a slump in bank sales, where issuance in a traditional busy period is less than half last year’s pace.

The overseas public-sector boom partly reflects investor demand for safe assets amid uncertainty about whether Prime Minister Theresa May can win parliamentary support for her European Union withdrawal agreement. Issuers are also rushing to lock in “attractive funding levels,” particularly swapped into dollars, before new volatility emerges, said Mark Byrne, director of syndicate at TD Securities Inc.

It’s a “perfect storm,” he said. There’s been “robust investor demand, particularly from bank treasury investors” and risks surrounding next week’s parliamentary Brexit vote is spurring issuers in action, he said.

Inter-American Development Bank is the offering the market’s 16th deal this year on Friday, a benchmark note due in December 2022. Issuers that have already done sales this year include European Investment Bank and Germany’s KfW.

Bank pound-bond sales in the first two weeks of the year are far short of last year’s 7.6 billion pounds total. A benchmark Australia & New Zealand Banking Group Ltd. covered bond in the market on Friday may raise this year’s tally to a minimum of 2.65 billion pounds.

(Adds bank sale slump in second paragraph.)

To contact the reporter on this story: Emma Haslett in London at ehaslett@bloomberg.net

To contact the editors responsible for this story: Hannah Benjamin at hbenjamin1@bloomberg.net, Neil Denslow

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