Public sector is surprise winner

Amid the carnage in the worst financial meltdown since 1929, one area of the market is thriving as if the credit crisis had never happened. In spite of the virtual shutdown of the credit markets for most issuers in the past week, institutions such as the European Investment Bank and the World Bank are still managing to borrow money through bonds – and at record low interest rates. This week the EIB, the funding arm of the European Union, raised $4bn in three-year bonds at a coupon rate of 2.625 per cent – the lowest ever for this maturity in recent times – and 40 basis points below midswaps which is the European reference point for pricing. Last week the World Bank issued a $1.5bn five-year bond at 35 basis points below midswaps – also a record – at a coupon rate of 3.5 per cent. Other issuers that have raised money at record... [read full story]