Selected housing association bonds added to Bank of England corporate bond-buying list

News03 Nov 2016Luke Cross

Bonds issued by fourteen housing associations have been deemed eligible for the Bank of England’s (BoE) corporate bond-buying programme.

The BoE updated its list today (3 November 2016) and included a number of bonds issued by A2Dominion, Affinity Sutton, Amicushorizon, Guinness, L&Q, Midland Heart, Notting Hill, Orbit, Peabody, Riverside, Sanctuary, Sovereign, Together and Wheatley Group.

Click here to see HA bond yields as at late October 2016

They include unsecured retail bonds from A2Dominion and benchmark issues by the others. There are a number of names not included in this batch, such as Places for People, Hyde, Moat, Great Places, Circle, BPHA and others.

HAs were omitted in the first list, which was announced in September 2016. Many on that initial list were utilities companies and operators, along with communications companies, as well as commercial property firms Segro and Hammerson.

The BoE will hold reverse auctions, with three purchase operations a week, on Tuesdays, Wednesdays and Fridays. It plans to structure each auction around bonds issued by organisarions from certain sectors and plan to include each eligible bond in an auction at least once a week.

The National Housing Federation (NHF) has been lobbying for housing associations to be included. The Housing Finance Corporation has also been vocal about their inclusion.

The NHF argued it would enable the sector to build a further 12,230 homes as a result of a fall in cost of funds and subsequent available finance.

In a letter to the bank’s Monetary Policy Committee (MPC), NHF chief executive David Orr said that if the asset purchase programme resulted in a 28 basis point fall in spreads then associations would be able to issue an extra £1.77bn of debt which would be enough to fund the additional homes. They said 12,230 homes could be funded if the average build cost was £145,000, a figure which came from the Homes and Communities Agency’s quarterly survey data.

The BoE first announced its plans for the Corporate Bond Purchase Scheme (CBPS) at the start of August 2016, as part of an economic stimulus package amid concerns of the fallout from the UK’s vote to leave the European Union (EU).

The scheme started to undertake purchases from 27 September 2016 and will operate for an initial period of 18 months.

The BoE will purchase a portfolio of up to £10bn of sterling corporate bonds that it says is ‘representative of issuance by firms making a material contribution to the UK economy, in order to impart broad economic stimulus’.

Housing association bonds included in BoE CBPS
A2D FUNDING II PLC 4.5% - 09/30/26
A2D FUNDING 4.75% - 10/18/22
AFFINITY SUTTON 4.25% - 10/08/42
AFFINITY SUTTON 5.981% - 09/17/38
AMICUSHORIZON 5.25% - 03/13/43
GUINNESS PARTNERSHIP 4% - 10/24/44
L&Q 2.625% - 05/05/26
L&Q 3.75% - 10/27/49
L&Q 4.62% - 12/05/33
L&Q 5.5% - 01/27/40
MIDLAND HEART 5.087% - 09/20/44
NOTTING HILL 3.75% - 12/20/32
NOTTING HILL 4.37% - 02/20/54
NOTTING HILL 5.25% - 07/07/42
ORBIT 3.5% - 03/24/45
PEABODY 4.62% - 12/12/53
PEABODY 5.25% - 03/17/43
RIVERSIDE 3.87% - 12/05/44
SANCTUARY 5.08% - 04/26/47
SANCTUARY 6.69% - 03/23/39
SOVEREIGN 4.768% - 06/01/43
SOVEREIGN 5.7% - 09/10/39
TOGETHER 4.5% - 12/17/42
WHEATLEY GROUP 4.37% - 11/28/44