BOE Bond Tender Drawing Blank Signals Growing Confidence, Evolution Says
Corporate bond investors didn’t ask the Bank of England to buy a single bond under its debt purchase program for the first time since March, signaling sentiment has improved, according to Evolution Securities Ltd.’s Gary Jenkins.
None of the 355 billion pounds ($552 million) of securities the BOE said that it would purchase under its twice-weekly program was tendered today. The central bank started the facility last year to offset the effects of the deepest financial crisis since the 1930s.
Credit markets have rallied since May when concern that governments would have trouble raising cash while trimming their budget deficits prompted investors to tender a record 507 million pounds of debt on June 8. Spain’s auction last week of 6 billion euros ($7.8 billion) of treasury bills and a bank stress test that showed 84 of 91 firms passed helped build confidence, Jenkins said in a note to clients.
“No doubt the positive earnings season and the improvement in economic data have helped to turn sentiment, but one can’t help thinking that the tipping point was the Spanish bond auctions,” wrote Jenkins, head of credit research at Evolution in London. “The positive reaction to the stress tests plus the relaxation of the Basel 3 proposals are continuing the recent positive trend.”