Surge in pension fund buying drives revival in UK corporate bond market

Pension funds are piling into UK corporate bonds, encouraging some French and German companies to issue sterling debt for the first time.

The UK’s £1.4tn “defined benefit” pensions industry has been switching to corporate debt for its higher yields and to prepare the schemes for potential sales to insurers, analysts said.

The share of European corporate bond sales denominated in sterling has risen to 8.4 per cent from 6.8 per cent at the beginning of 2023, the busiest start to the year in a decade for investment-grade issuance from non-financial companies.

The demand has helped push a number of continental European companies to issue sterling debt for the first time in recent months, including German real estate company Vonovia, German truck manufacturer Traton and French luxury goods group Kering.

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