BOE's Chris Salmon, Exec Director for Markets on Rtrs
- timetable for new "risk-free alternative benchmark to LIBOR will be set out in 2016
Salmon is speaking in London at the Association of Corporate Treasurers Corporate Funding Conference
He's responsible for all BOE operations in financial markets, management of the Bank'ds balance sheet and the UK's fx reserves on behalf of HMT
"If history repeats itself, then we might expect to see conditions in some credit markets become less accommodative as we approach 'lift off'.Indeed,
our contacts attribute some of the rise in spreads during 2015 to
expectations of monetary policy normalisation (particularly in the US).
That
said, this monetary policy normalisation cycle will likely be different
from the past - and hence corporates need to recognise that
transmission of this eventual change in policy through banks and capital
markets may be different.
One reason is that the MPC has said
that when Bank Rate does increase, it is likely to rise more gradually
and to a lower level than in recent cycles. Another is
that QE-induced portfolio rebalancing has compressed term premia in a
range of asset classes, including corporate debt. The reaction of term premia to signs of monetary policy normalisation is yet to be tested. This
is one reason that central bankers are going to some lengths to
establish clear communication strategies around their monetary policy
decisions.
Moreover, given significant correlations amongst long-term bond yields in the UK, US and euro area, news about global economic prospects will have an impact on our domestic bond markets. For example concerns about global growth have contributed to significant increases in credit spreads since the summer. Similarly, foreign monetary policy decisions can also be expected to have some impact. The UK's many internationally-focussed firms need to be particularly alert to the manifold factors that determine the yields their investors demand"
Full speech here
BOE's Salmon - Getting harder for companies to raise funds
