Banks weigh the costs of sterling issuance
HBOS is the only UK issuer to have so far issued a covered bond in sterling. “We will issue in sterling if we feel the market is there or, in the particular case of the social housing covered bond [HBOS issued a sterling-denominated covered bond backed by its social housing mortgage portfolio in December 2004], where we felt the long-dated sterling investor had a better feel for the underlying asset class than a European investor,” says Robert Plehn, head of securitization and covered bonds at HBOS.
Abbey might eventually follow suit. “There is the possibility of a sterling bond coming from us in the future and US dollars will certainly offer some exciting possibilities,” says Chris Fielding, the bank’s head of securitization. “There is the potential for reverse enquiry placement in any liquid currency.”
Several non-UK issuers have also issued in sterling: Depfa (asset covered securities), Dexia and CFF (obligations foncières) and Eurohypo (lettres de gages and mortgage Pfandbrief).
Volumes in the currency are expected to remain subdued, although with the potential for non-euro issuance firmly focused on the US dollar market.