Anthony Hilton: Bonds show investors are upbeat about economy

Scarcely a week goes by now without there being a bond issue for some mid-sized company, and this week was no exception with a convertible from Hansteen – a property firm specialising in industrial warehouses.

It’s 30 years since the Americans went down a similar route and developed their corporate bond market following the drying up of bank lending in the wake of the 1980s sovereign debt crisis. Now, at last, the bond markets here are also beginning to offer a genuine alternative to bank finance.

We should not underestimate the significance of this. While the UK banks are gradually returning to health, credit will remain tight because the dozens of foreign banks which used to operate in the UK market are no longer active here. British banks are not strong enough to make up the shortfall so alternative sources of finance like the bond markets are crucial.

The other aspect of the Hansteen issue, and a similar one the previous week from a regional shopping-centre specialist called New River, is what they say about the attitude of investors. Clearly the skills of the advisers and brokers count for a lot – Kinmont and Liberum did a good job with New River – but having said that, investors would not be picking up stocks like these if they were not a lot more optimistic about the UK economy than they were a few months back.

Industrial warehouses and regional shopping centres are known in the trade as secondary properties because they have tenants who find it hard to pay the rent when the economy turns down. So you buy secondary properties when you think that the economy as a whole is on the mend.