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Capital Markets

Exclusive: BoE plans foreign currency bonds

Planned distribution is via syndication rather than auction for the financing of foreign currency reserves.

The Bank of England is planning to issue non-sterling medium-term debt to finance its foreign exchange reserves on an annual basis. The bank has indicated that the bonds will be distributed via syndication rather than auction, news that will excite investment banks’ originators because of the prospect of lead managing these transactions. The first deal is likely to take place in the first quarter this year: in future, the BoE said it will give exact details on currency, maturity and the group of the banks early each year.

In addition to the prospect of earning fees, it is the rarity of syndicating pure UK government risk that makes this a highly prestigious mandate to win. The last syndicated UK government deal came through the auspices of the Debt Management Office – the £1.25 billion 50-year index-linked sold in September 2005 via Barclays, Morgan Stanley, RBS and UBS. Until that point the DMO had always preferred auctions, but after it suffered a mixed result on an ultra long-dated fixed-rate deal sold earlier that year, it turned to syndication in an attempt to get a better result.

The last time a similar deal was done was way back in June 2003.

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