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A new SONIA based bond. Does this mark the beginning of the end of LIBOR in public debt markets?

Last week the European Investment Bank (EIB) issued the first public bond based on the reformed SONIA benchmark, marking another step forward in the process of benchmark reform in the U.K. The 5-year, £1bn issue was priced with a coupon of 35bp above overnight SONIA.  The deal may very well serve as a benchmark for future issuance in the LIBOR-less world which the Bank of England and other regu…

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Beware the death of Libor

Guest contributor – David Covey (Financial Institutions Analyst, M&G Fixed Income Team)

The end is coming for the London interbank offered rate (Libor).  Ten years after suspicions emerged that this key interest rate was being manipulated in the financial crisis, regulators are ramping up their efforts to replace the benchmark rates. The Bank of England (BoE) and US Federal Reserve are leading …

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Inflation Hedging for Long-Term Investors – the most important academic paper you will read this year

You would have to be living under a rock to not notice the increasing number of articles dedicated to the topic of inflation. The increase in inflationary articles has almost been as dramatic as the increase in inflation itself. Even 3 out of our last 4 blogs have been on inflation. Unsurprising really, seeing as we are bond investors.  Looking elsewhere, the pundits have decided to focus on th…

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Porsche outmanoeuvres the banks

Porsche is beating the banks at their own game. In the ‘go-go’ pre-credit crunch days, the banks gave Porsche an overdraft facility, whereby Porsche had the option to borrow €10bn at a cost of only 0.2% over LIBOR. The banks will now be regretting that they’d offered this credit facility.

Even though we are now in a full-blown credit crunch, Porsche is still able to borrow from the banks at 0.2…

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