• Home
  • About
  • Subscribe
  • Conference
  • Events Calendar
  • Webcast151
  • MOTB
  • Log In
  • Register

Room 151

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

CIPFA Conference Goes Big On Bonds

0
  • by Editor
  • in Funding · Recent Posts
  • — 3 Nov, 2011

Delegates attending today’s CIPFA Treasury Management Seminar at RBS’s Bishopsgate conference centre will be sure of one thing: bonds are definitely not off the agenda.

Certainly something of a dampener was put on the idea of local authority (LA) bond issuance in September when the PWLB dropped its lending rate for the buy-out of the Housing Revenue Account (HRA). A number of LAs were busy crunching the numbers prior to the PWLB’s announcement and had calculated that there were around 20bps of savings to be made in the bond market if the PWLB’s rate was to remain at 1% over gilts. It wasn’t, not for HRA finance at least, and the crunching ground to a halt.

Today’s conference will have certainly re-opened the discussion, however, and it seems that both local authorities and the City are looking beyond HRA loans at financing other projects via the markets. The Local Government Association’s (LGA) Mark Luntley, part of a working group exploring the business case for various types of bonds, commented that in the current situation LAs are “very dependent on one source of finance”.

Luntley made clear that the LGA were just looking, at this stage, at the business case for various bond structures but expressed a personal liking for retail bonds, where LAs would borrow from private savers. He questioned, however, the likelihood of a viable pricing model for a retail offering. Other options being explored by the LGA include both single authority and joint authority issues in the institutional market.

The single issue bond appears to be on the radar for some of the bigger LAs where a public issue needs to be upwards of £200m in size and come with a credit rating from one or more of the ratings agencies. With Birmingham having recently been assigned a AAA-rating and Wandsworth days away from announcing their rating, there are at least a couple of local authorities investing in the tools to go down the single issue route.

Manchester City Council’s Richard Paver, also speaking at the conference, was, on the other hand, underwhelmed by offers to borrow at 80bps over gilts in the bond market and has instead recently secured financing for 30-year-money from the European Investment Bank (EIB), for £450m, to finance tram developments at preferable rates.

The most viable structure, at least for the vast majority of LAs, will be the joint or aggregate bond issuance where separate institutions borrow collectively in one vehicle. Although the joint issue presents a number
of challenges and restrictions surrounding timing and cross-guarantees, the sum required by a LA to join such a scheme is well below that of the single issue. So will the research herald the launch of an LGA backed collective bond scheme? The association was certainly supportive of CCLA’s recently launched Public Sector Deposit Fund, committing £10m to the fund, which was designed to harness the collective clout of LAs. Probably a good indicator!

M&G’s Rob Marshall, presenting the investor’s perspective said he was “not expecting a surge of issuance in the market” but felt that investors would look favourably upon an LA joint issues because of
the “similarities underpinning the credit profiles” of the joint issuers and the “implied support” of the government. He cautioned though that LAs had been out the market for some time and would need to brush up on their market savvy. “Education goes a long way towards improving issuance levels” he said.

Share

You may also like...

  • Lancashire calls for government support as reserves risk running dry Lancashire calls for government support as reserves risk running dry 6 Oct, 2016
  • Councils weigh up risks following Co-op sub-investment downgrade Councils weigh up risks following Co-op sub-investment downgrade 14 May, 2013
  • Chris Buss: 100% business rates retention is a Meccano set without a spanner Chris Buss: 100% business rates retention is a Meccano set without a spanner 6 Mar, 2017
  • 40bps off PWLB Standard Rate for infrastructure loans 40bps off PWLB Standard Rate for infrastructure loans 7 Dec, 2012

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • Register to become a Room151 user

  • Latest tweets

    Room151 1 day ago

    How can local government ‘build back better’?: Beverley Gower-Jones looks at the options for driving small business entrepreneurship in clean technologies. Innovation is essential for local authorities to save money and reduce emissions, it is the… dlvr.it/RtT3nS pic.twitter.com/bSMB6OG70t

    Room151 1 day ago

    Helen Randall: Spelthorne report places spotlight on ‘controls’: Fresh criticism of Spelthorne Council raises the question of what “good” controls look like when negotiating a property deal. Spelthorne Council’s continuing debacle over property… dlvr.it/RtSPhy pic.twitter.com/9uCOJgBcH6

    Room151 1 day ago

    Step-out strategies: Hitting the sweet spot between liquidity and ultra-short duration: Sponsored article: Jemma Clee describes how an ultra-short duration strategy can help local authorities enhance returns. Despite the expectation of a low, and… dlvr.it/RtSPZb pic.twitter.com/pdXPpv5lcN

    Room151 2 days ago

    What role will climate change have on the pricing of government bonds?: Sponsored article: Kerry Duffain finds that “vulnerability and resilience to climate change” have a significant impact on the cost of government borrowing. Ardea Investment… dlvr.it/RtNKv7 pic.twitter.com/wDjT31x4Yt

    Room151 3 days ago

    ESGenius: Slashing emissions will fuel green growth for decades: Sponsored article: Velislava Dimitrova argues that a big enough investment could mean transition to a low, or no, carbon economy can become a reality. The world needs to slash carbon[...] dlvr.it/RtKZJp pic.twitter.com/cd8S3ijERl

    Room151 3 days ago

    Prudential code: “Not perfect, but its heart is in the right place”: The new Prudential Code offers revised rules for borrowing. Nikki Bishop is sceptical it will work while Gary Fielding offers his support. Nikki Bishop I have been asked to give[...] dlvr.it/RtKZFh pic.twitter.com/OriN28lXcb

    Room151 4 days ago

    Tremendous report from @MarkSandford3 citing @room_151 no fewer than six times (despite what the @lgcplus fact checking/counting dept might tell you) #localgov commonslibrary.parliament.uk/research-brief… 1/5

    Room151 2 weeks ago

    Dan Bates: Capitalisation directions are not the only tool for rebuilding finances: Dan Bates argues deep seated problems are contributing to a rush for capitalisation directions. For some time now we have been reading that a number of councils are in… dlvr.it/RspKff pic.twitter.com/xRRsgVim9u

  • Categories

    • 151 News
    • Agent 151
    • Blogs
    • Chris Buss
    • Cllr John Clancy
    • Dan Bates
    • 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 Fitzgerald
    • Stephen Sheen
    • Steve Bishop
    • Technical
    • Treasury
    • Uncategorized
  • Archives

    • 2021
    • 2020
    • 2019
    • 2018
    • 2017
    • 2016
    • 2015
    • 2014
    • 2013
    • 2012
    • 2011
  • Previous story Victory for LAs in Icelandic Banking Case
  • Next story Interest in Derivatives on the Up

© Copyright 2021 Room 151. Typegrid Theme by WPBandit.