Optimising investor relations and market strategy for housing associations

Market update

Focus: investor relations

• Chatham is working with housing associations (HA) to update and structure investor relations programmes that both support ongoing investor communication and increase agility for future issuance.
• Our most recent insights piece, Investor relations: Low-hanging fruit for public and private issuers, outlines how proactively maintaining a high standard of investor relations helps credits stand out against peers, allowing for efficient access to capital.
• While many HAs follow some best practices, few consistently deliver on all of them. If you would like to discuss any aspects of your investor relations programme or capital markets issuance plans, please reach out to the Chatham team.

Capital markets

• Despite the increase in capital markets issuance over the first half of 2024, in particular the first quarter, primary issuance remains below expectations.
• Low issuance has largely been driven by persistently high-absolute yields, counter to expectations of lower rates.
• The lack of supply contributed to historically tight HA spreads throughout 2024, with a slight widening into mid-June and subsequent reversal. The cost of waiting could be a future issuance crowding, leading to reduced investor demand and/or lack of tenor flexibility for issuers.
• Credit spreads remain tight and broader market corporate spreads remain steady, with most recent issued debt trading inside initial pricing.

Economic news

• The Bank of England’s (BoE) bank rate remained at 5.25% after the Monetary Policy Committee (MPC) voted by a majority 7–2 to keep it unchanged.
• Headline CPI is in line with the the 2.00% target and the decrease in core CPI is encouraging, especially compared to its peak in the year prior at 7.10% (May 2023).
• Higher services inflation of 5.70% and continued wage growth places upward pressure on inflation. The MPC reiterated that it needs to see further evidence these pressures are removed before lowering rates.
• It is still unlikely that the MPC will vote to cut the bank rate and loosen monetary policy in August, with current markets pricing in the first rate cut for September.

Sterling rates markets

• Rates have come in c. 10 basis points across the gilt and SONIA swap curves (10 years and longer) since the start of July, partially reversing the 20-basis-point increase in late June.
• As outlined and reflected in our Q2 2024 Business Plan Assumptions, the 30-year forward gilt has increased and sits consistently around the 4.80% mark for the next five years. This is a change in sentiment compared to the fourth quarter of 2023, requiring HAs to adjust long-term rate expectations.

Indicative pricing