The Bond Market
The London Stock Exchange is one of the world's major centers for the issuing and listing of bonds. London is also one of the global centers for the listing of euro-bonds, debt instruments offered exclusively to institutional investors.
Issuers that choose to list their bonds in the UK fall into four categories:
- Corporate issuers - companies from around the globe, including some of the UK and the world's most successful and best-known businesses
- Governments and their agencies - the UK government is one of many national governments that now list debt instruments on the market
- Local authorities
- Multilateral institutions - bodies such as the World Bank and the European Investment Bank offer their debt instruments through a London listing.
The maturity of bonds listed on the market ranges from money markets debt (that is, commercial paper, maturing within a year) through to long-term bonds with maturities of 15 years or more. Undated bonds can also be listed: these pay interest in perpetuity.
Simple bonds include fixed rate, floating rate and zero coupon bonds. More structured instruments include asset-backed and index-linked bonds.
Domestic bonds are denominated in the issuer's local currency and offered to local investors. Foreign bonds are offered to investors outside the issuer's own country of registration and are denominated in the currency of the market where they are listed. Euro-bonds, marketed internationally, are issued outside the issuer's country of registration in a currency other than that of the market where they are listed.
There are in excess of 9,000 bonds listed on the LSE offering a wide range of maturities, interest rates and yields.
The financial crisis in the UK is affecting government bonds. The Debt Management Office (DMO), which has been responsible for government bond issuance since 1998, issued a record GBP 220bn (USD 321bn) of bonds during 2009 as the UK government attempted to pay for its bail out of the banking sector.
The DMO will now sell some of the longest-dated bonds through syndicates, where groups of investors are brought together, and mini-tenders, which will enable it to gage demand for the bonds more accurately. These methods will be in addition to the usual way of selling bonds through timetabled auctions.
In March 2009 an auction of long-dated bonds due to mature in 2049 failed when not enough investors came forward.