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B&B underlines credit quality with covered bond issue

Bradford & Bingley’s issuance of a £500m two-year covered bond through ABN Amro last week is a positive sign of its credit quality, say brokers.

Covered bonds are securities backed by mortgages or public sector loans that remain on the issuer’s balance sheet. Both HBOS and Nationwide have recently used covered bonds.

This comes after B&B saw its share price fall by 15 per cent two weeks ago during the Northern Rock debacle. It is understood that the FSA was looking at the issue of funding across the market.

John Charcol senior technical manager Ray Boulger says: “This says very good things about B&B’s credit quality. It tends to be the bigger players that do it, so you certainly expect HBOS and Nationwide to be able to do it but I do not think it is a market open to everyone.”

Nationwide non-retail executive director Matthew Wyles adds: “Covered bonds only really work if you have a strong balance sheet so only a limited number of organisations can do it. They are quite a cheap way of funding.”

Wyles believes none of the new entrants would be able to issue covered bonds as they are the preserve of big balance-sheet lenders.


Northern Rock to cut the number of its mortgage products by over two thirds

Northern Rock is set to have its number of products cut by over two thirds in its first product change since its funding crisis.The lender has removed all of its one and a half year fixed rates from its Together and flexible fixed-rates range.Its changes also see it withdraw its three year fixed-rate and variable […]

ABI warns state should not subsidise personal accounts

The Association of British Insurers says personal accounts could damage existing provision and has warned the Government against any form of state subsidy.At an ABI fringe event at the Labour conference, director of life and savings Maggie Craig said three issues must be resolved – ensuring no state subsidy, keeping the scheme targeted at people […]


Out from the long grass? An IT and NI merger

Those with a long memory will recall that at the start of the last parliamentary term George Osborne announced his intention to merge income tax (IT) and national insurance (NI).  Headline grabbing as the initiative was, the reality of the complexities, challenges and costs of such a move resulted in this idea being kicked into the political long grass.


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