BoE corporate bond buying aims to avoid over-concentration in firms and sectors – RBS

Imogen Bachra, Research Analyst at RBS, suggests that it comes as little surprise that in the UK majority of eligible issuance for BoE’s corporate bond buying comes from the utility and consumer sectors, comprising over 66% of outstanding market value.

Key Quotes

“Big names (by outstanding market value) that feature in these sectors include EDF, Severn Trent Water, RWE, National Grid, GSK, BAT, Imperial Brands, Walmart and BMW. Combined, the utility and consumer sector also comprise 55% of the paper rated A- or higher.

The Bank has been careful to state that “it will make purchases so as to avoid over concentration in particular sectors or firms”, suggesting that it will indeed weight its purchases towards those sectors that form the majority of the universe, to avoid crowding out investors in the smaller sectors. This suggests the potential for the utility and consumer sectors to outperform.

On the contrary, smaller sectors (basic materials, technology, diversified) will likely see less buying from the BoE. Large names in these sectors include Apple, IBM and Glencore (which featured in the last buying.”