LONDON (MNI) – Conditions in UK corporate debt markets deteriorated
in the second quarter while sterling commercial paper was less impacted
by the market turbulence, with total amounts of sterling CP outstanding
holding steady, the Bank of England said in its Q2 Asset Purchase
Facility Report.
The BOE has halted quantitative easing, but continues to carry out
transactions in private sector assets – including buying and selling
corporate bonds and lending out gilts, with purchases funded by the
issuance of treasury bills. The APF report highlighted the problems in
corporate bond markets and the greater resilience of the sterling CP
market.
The central bank noted that heightened concerns over sovereign debt
and eurozone fiscal adjustment impacted on corporate bond prices.
The BOE’s APF acts as a “market maker of last resort” in corporate
bond markets, buying and selling typically small amounts of bonds, It
said demand for its corporate debt activities picked up in Q2.
“Conditions in UK corporate debt markets deteriorated marginally
during May and early June. This was reflected in increased usage of the
APF purchase facilities,” the BOE said.
Gross bond issuance by UK private non-financial corporations
(PNFCs) in Q2 came in below 2009 levels but was “broadly in line with
historical averages”, while “Market contacts suggested that some firms
had delayed issuance as a result of market conditions,” the BOE report
said.
Gilts bought by the APF can be lent to the market via an
arrangement with the Debt Management Office.
The BOE said such lending declined in Q2, with the average daily
aggregate value of gilts lent by the APF to the DMO standing at stg2.3
billion, down from stg3.8 billion in Q1.
–London Bureau; Tel: +4420 7862 7491; email: ukeditorial@marketnews.com
[TOPICS: M$B$$$,M$$BE$]
