UK companies are issuing bonds again after the shock sparked by the “mini” Budget, but deals are sparse and investors are demanding high returns — a worrying sign for the country’s more indebted borrowers.
Northumbrian Water broke a six-week lull in UK corporate bond markets in late October. But even this steady, reliable utility company had to pay a yield of 6.585 per cent on its £400mn, 12-year bond — well above the 2.375 per cent interest rate the north-east company paid on 10-year debt in 2017. A later deal, for Northern Ireland Electricity Networks, came with a similar scale and yield.
An Ice Data Services index of sterling corporate bonds from outside the financial sector fell 14 per cent in the third quarter, compared with 3 per cent for a gauge of euro-denominated bonds. While demand remains high for strong businesses’ debt at the right price, investors say sterling debt markets are likely to remain unwelcoming to riskier borrowers.
“It would take someone braver than me to go out and buy a lowly rated clothing company or whatever it may be,” said…
