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Budget prompts surge in housing association bond prices

Wed 15 Jul 2015

Investors have reacted to the Budget announcement by upping the price on housing association bonds, experts have observed.

Chancellor of the Exchequer George Osborne made a number of announcements that affect the social housing sector during his keynote speech last week. For instance, he confirmed rents would come down by one per cent a year for four years from April 2016.

According to Canaccord Genuity, there had been "very little reaction" to the Budget in the first couple of days.

However, the financial services provider said that over the weekend, spreads widened "quite considerably across the board".

Henrietta Podd, head of debt advice and origination at Canaccord Genuity, stated that when a housing association issues a new bond in the future, it will have to demonstrate how these changes have affected their business plan if they wish to secure investment.

Speaking to Inside Housing, she noted the "last burst of jitters" arose when the so-called bedroom tax and various welfare reforms were introduced. This meant there were "two or three bond issues where the whole world turned up", as investors were keen to understand the impact of the changes.

Ms Podd added the next new bond will represent a test of investor appetite, but stressed they should not read too much into recent developments in the secondary markets.

Bonds increased by between five and ten tenths of a per cent as investors considered the implications of the Budget announcement.

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