• Home
  • About
  • Newsletters
  • Conference
  • TMS Links
  • Calendar
  • Log In
  • Register

Room 151

  • 151 BRIEF

    What's New?

  • NHS trusts launch legal bid for business rate relief

    April 12, 2018

  • Northants appoints new chief executive

    April 12, 2018

  • Councils spend £3.8bn on commercial property

    April 12, 2018

  • WMPF buys £26m Leeds office block

    April 11, 2018

  • New taskforce to push for council finance clarity

    April 11, 2018

  • Scottish authorities urged to redesign services

    April 11, 2018

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • Agent 151
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • David Green
    • Richard Harbord
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
    • Stephen Sheen
  • Interviews
  • Jobs

Councils continue search for returns despite interest rate cut delay

0
  • by Colin Marrs
  • in 151 News
  • — 14 Jul, 2016
Financial listings in newspaper

image by Andreas Poike, Flickr

Local authorities are still adjusting investment strategies following the EU referendum, despite the Bank of England’s decision not to cut interest rates.

The bank’s monetary policy committee this week voted eight to one to leave the UK’s headline interest rate at 0.5% despite expectations it might opt for a cut to 0.25%.

Alan Simkins, director of the Local Authority Division at investment firm King and Shaxson, told Room151 that he had seen increased interest in treasury bills since the Brexit vote.

He said: “Treasury bills represent a great opportunity to obtain short dated UK government debt at better levels than either the gilt market or the Debt Management Account Deposit facility.

“Investors in the gilt market would have to place funds out to five years in the gilt market – currently at 0.35% – purely to beat where one month yields cleared in last week’s Tbill tender, which was 0.34%.”

He added that he has seen a continuation of authorities locking into higher yields in the market for certificates of deposits.

He said: “Should yields fall further from the purchase date, authorities will own a higher yielding asset with good credit quality and liquidity.”

Short dated bonds are also proving popular in financial, corporate and covered names, for the same reason, he added.

He said: “The competition for these offers is obviously very high, especially with more locals adding bonds to their treasury management strategies, but we do see a lot of activity in this space.”

Dennis Gepp, managing director and chief investment officer, cash, at Federated Investors said that treasury investors had continued a move into the company’s Cash Plus fund.

The fund is similar to a money market fund but has a longer duration and next day – rather than same day – access.

Gepp said: “We have seen steady growth of the cash plus fund over the past couple of weeks.

In the past year and a half, it has gone up 35% and since the vote it has gone up just less than 10%. Having said that, we are talking about small numbers – it might sound a big rise but it just means it has gone from £642m to £693m.

“There hasn’t been a wholesale movement out of shorter length money market fund investments.”

He said that his firm’s larger clients are netting between 51 and 53 basis points from MMFs whereas the cash plus fund has been delivering between 78 and 80 basis points.

But he added that it is difficult to assess the exact role of Brexit in the rise of interest in the “cash plus” fund.

He said: “There are other factors. Some people who may have been putting slightly longer term money into a property fund might not be so keen to do so now.

“There has also been a fair bit of money released from Icelandic banks – if that was considered to be more sticky I wouldn’t be surprised to find its way to slightly longer-term investments like the cash plus fund.”

But local authority treasurers appear to be keeping their nerve in relation to property fund investments, following last week’s news that seven commercial property funds have suspended withdrawals in the wake of the Brexit vote.

John Kelly, from the CCLA, said that there had been no demand for withdrawals from its property fund.

He said: “The clients have behaved sensibly. In the presentation of our fund, we make it plain that there might be capital volatility but long term rewards from income flow are on offer.

“Occupier trends are strengthening and rents are going up. We are not officially forecasting anything but we would be very surprised if we didn’t continue to grow our income.”

He said that an initial valuation of property within the fund by BNP had made a fair market adjustment of just -4.3% on the value of the fund’s portfolio.

Mark Horsfield, director at treasury adviser Arlingclose, said the decision to hold interest rates meant there would be no change in its strategy recommendations, even with an expected cut now due in August.

He said: “It remains a lower for longer interest rate outlook with the balance of rate risk to the downside.”

But he added that the appointment of incoming prime minister Theresa May’s cabinet was of equal importance as the rates decision.

He said: “A radically changed Cabinet signalling a more accommodative fiscal economic policy than that which was in place yesterday may influence the extent of that monetary loosening in the future.”

Share

You may also like...

  • South Yorks, RBS bad bank, Scottish Futures Trust, Probation pensions, Homeless fund South Yorks, RBS bad bank, Scottish Futures Trust, Probation pensions, Homeless fund 16 Aug, 2013
  • Northants first to reach tipping point as council issues section 114 notice 5 Feb, 2018
  • Mansion Tax, HRA Cap, JV Concerns, Solar Power Loan, Lothian Pension Fund Mansion Tax, HRA Cap, JV Concerns, Solar Power Loan, Lothian Pension Fund 25 Sep, 2014
  • News Roundup: DCLG cuts, Manchester business loans, JV collapse, land release and HRA borrowing 4 Jun, 2015

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • Register for the Room 151 Weekly Email Digest

  • Latest tweets

    Room 151 1 day ago

    Five London LGPS funds go it alone to invest in private debt: A group of five London LGPS funds are set to create their own pooled private debt fund, outside of the London Collective Investment Vehicle (CIV). With the London CIV yet[...] dlvr.it/QPJwg8

    Room 151 1 day ago

    Councils set to bank an extra £870m from rates retention pilot: Councils included in the 100% business rate pilot scheme are set to reap £870m more next year than if they had not taken part, according to a new report. The[...] dlvr.it/QPJwYD pic.twitter.com/WCJu6ozq7B

    Room 151 1 day ago

    Infrastructure rate bidding to be capped at £100m per council: Bids for the Public Works Loan Board’s new local infrastructure rate will be capped at £100m per authority, the Treasury has announced. In his autumn Budget last year, chancellor Philip[...] dlvr.it/QPH6LN

    Room 151 3 days ago

    David Green: Credit rating the Municipal Bonds Agency: The Municipal Bonds Agency has achieved a credit rating from Moody’s. David Green explores what went into the decision. Moody’s has assigned UK Municipal Bonds Agency plc a Aa3 credit[...] dlvr.it/QP7YL8 pic.twitter.com/zwOcQRdkn1

    Room 151 4 days ago

    Chris Buss: Turn, turn, turn — in-house or contracted services: The debate over choosing in-house or contractor-provided services has reopened after high-profile suppliers encountered trouble. Chris Buss concludes there is a case for services supplied… dlvr.it/QNvSWH pic.twitter.com/50p0sF0xfi

    Room 151 1 week ago

    Spelthorne borrows £30m as PWLB lending tops £1bn: Spelthorne council has borrowed £30m to refinance two property deals completed last year, as March’s total Public Works Loan Board borrowing tipped over £1bn. The authority, which 18 months ago[...] dlvr.it/QNXgkm pic.twitter.com/wnAb2ylhJz

    Room 151 1 week ago

    #localgov #Funding twitter.com/DavidJ_Brindle…

    Room 151 1 week ago

    LGPS Central launches three funds: LGPS Central, the £40bn Local Government Pension Scheme pool, has launched three new pooled funds as it begins operations. The pool is one of eight which began to transfer assets[...] dlvr.it/QNXJXP

    Room 151 1 week ago

    Final guidance revealed for application of IFRS 9: New guidance reflecting the controversial accounting standard IFRS 9 has been issued for local local authoritie. A joint board (CIPFA/LASAAC) of the Chartered Institute of Public Finance and Accountancy… dlvr.it/QNVnJY pic.twitter.com/XG5fGz6dNL

    Room 151 1 week ago

    Dan Bates: The importance of council tax in the fair funding debate: Local authorities have set record council tax rises. Dan Bates argues that as some councils do well from the tax while others suffer it is critical for officers to engage[...] dlvr.it/QNTwWT pic.twitter.com/NJscR91tPd

    Room 151 1 week ago

    Basingstoke forward-funds office development room151.co.uk/brief/#basings… #localgov #development

    Room 151 1 week ago

    Betts urges progress on #EU structural funds replacement scheme #localgov room151.co.uk/brief/#betts-u…

    Room 151 1 week ago

    Northants to exhaust reserves room151.co.uk/brief/#northan… #localgov

    Room 151 1 week ago

    Town and parish councils increase spending on services room151.co.uk/brief/#town-an… #localgov @NALC

    Room 151 1 week ago

    Q&A: pbb Deutsche Pfandbriefbank on lending to local authorities: Sponsored Q&A: Jean Christophe and Edward Simons of pbb talk to Room151 about forward starting loans. Q: Tell us about your recent activity as a lender to UK local authorities[...] dlvr.it/QNGhvJ pic.twitter.com/RR6nZnR9xa

    Room 151 2 weeks ago

    #localgov twitter.com/CIPFA/status/9…

    Room 151 2 weeks ago

    #localgov twitter.com/StephenJCSheen…

  • Categories

    • 151 News
    • Agent 151
    • Blogs
    • Cllr John Clancy
    • David Crum
    • David Green
    • Development
    • Forum
    • Funding
    • Graham Liddell
    • Ian O'Donnell
    • Interviews
    • Jackie Shute
    • James Bevan
    • Jobs
    • LGPSi
    • Mark Finnegan
    • Recent Posts
    • Resources
    • Richard Harbord
    • Stephen Sheen
    • Steve Bishop
    • Technical
    • Treasury
  • Archives

    • 2018
    • 2017
    • 2016
    • 2015
    • 2014
    • 2013
    • 2012
    • 2011
  • Previous story News round-up: Business rates income, Warrington home loan, MPs consider councils pensions, HRA reform criticism
  • Next story LGPS: Liabilities, regulatory pressure and de-risking

© Copyright 2018 Room 151. Typegrid Theme by WPBandit.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we'll assume that you are happy to receive all cookies from this website.OK