BoE’s package leads to a surge in bond issuance

The Bank of England’s (BoE) comprehensive package, especially the introduction of a £10 billion corporate bond purchases has triggered a mega surge in bond issuance from UK corporates as the companies join in to avail the benefits of lower yields. After the announcing of the package, the market saw biggest surge in issuance in more than three years.

On the week, the BoE eased policy, corporate bonds worth of £1.78 billion were issued and in last week issuance reached £1.65 billion. The amounts of bonds issued in last two weeks surpass the total amount issued in three months prior to that. The year to date volume is already more than 50 percent higher than that of last year.

After the inflation data for July got released yesterday the bonds scaled back their gains and yields rose, however, that may prove to be only temporary as the central bank likely to allow temporary overshooting of exchange rate-driven inflation. If the growth and the employment weaken the central bank is likely to respond again. Some economists are forecasting another rate cut in November.