View from City Road: The long view on local bonds
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.After the Hammersmith and Fulham swaps nightmare, it is hardly surprising that councils are still regarded with a touch of suspicion in the City. But another quite separate local authority market is set to spring to life next week after an absence of a dozen years: Salford and Leicester are hoping to borrow with long-term bonds.
If they go ahead with their 25-year issues totalling about pounds 180m they will be the first since a Birmingham stock in 1982. With advisers UBS the two councils have been on roadshows in London and Edinburgh and have been encouraged by the response.
These bonds are old-fashioned stuff, similar to gilts, and nothing like the swaps market. But there is a link, of sorts, in that much effort has gone into reassuring investors there will be no risk of their loans being voided in some future court action against a rogue local authority.
Just before Christmas the Department of the Environment announced approval for new stock issues in terms that made this clear.
Ten years ago, 40 per cent of councils' long-term borrowing was from the Public Works Loan Board. But now the Government has authorities' long-term financing under its thumb, with more than 90 per cent coming from the PWLB, which was deliberately made much more competitive.
Detractors wonder what the advantage of bonds could be, since rates on the PWLB's long-term loans have a ceiling of a very reasonable 0.5 percentage points over gilts and there are no merchant bank fees to pay. On the other hand, long-term loans from the PWLB have been harder to get as the PSBR has soared, an incentive to councils to offer a decent price. As for the Government, every one of these bonds issued is another gilt fewer to sell.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments