Apple, BMW and McDonalds debt could be scooped up by the Bank of England later this month, as the central bank kicks off a £10bn corporate bond-buying programme designed to help the UK economy cope with any fallout from the vote for Brexit.
The companies were all included in a list published by the BoE on Monday detailing the bonds of roughly 100 companies that are currently eligible to be bought under the programme that starts on September 27.
Foreign companies that have made the list are judged eligible if they make “a material contribution to economic activity in the UK,” the BoE said.
“They are doing what they said they would do,“ said Suki Mann, a former credit strategist who now runs the independent site Credit Market Daily. “Whilst the corporates that they have specifically listed will benefit the most, there will be a knock-on effect on the whole of the corporate bond market.”
The bond-buying programme, which was announced as part of a wider stimulus package in early August, drew mixed reaction from investors and strategists given the relatively small size and limited influence of the sterling-denominated bond market.
In its statement on Monday, the Bank said that companies “with significant employment in the UK or with their headquarters in the UK” will be judged as delivering a material contribution. Whether a business generates significant revenues in the UK or has a lot of customers or sites in the UK will also be taken into consideration.
Alongside foreign multi-nationals, Britain’s Vodafone, the state-backed Transport for London and the National Grid all had specific bonds listed as eligible.
In addition, the bonds must be rated investment grade by at least one rating agency, must have a total value of at least £100m and must mature in over a year.
In contrast to the European Central Bank, the BoE will announce the its weekly bond purchases on the prior Friday. Overall, bonds from the power sector will make up 25 per cent of the current list of eligible debt followed by so-called consumer non-cylicals, including cigarette and shampoo makers.
Purchases will aim to be representative of a sector’s presence in the bank’s list of eligible bonds and the BoE will try to prevent any one company from having too big a presence in its portfolio, the release said.
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