Capital Markets: Issuer Strategy - As Safe As Houses - Edward Russell-Walling Examines The Move By HBOS To Create A Social Housing Covered Bond And Its Attractiveness To European Investors.(Halifax Bank of Scotland)

Banker, The, February, 2005

Any half-decent treasury textbook warns of the need for diversification of funding sources. Few advise the creation of a new asset class, although that has not discouraged HBOS. Last December, the bank carved out new territory in the sterling debt market with a oe3bn programme of covered bonds secured on loans to housing associations. Enter stage left the "social housing covered bond", a hitherto unknown species of debt.

HBOS, with its powerful presence in UK mortgage lending, is a respected name in both equity and debt markets - so much so that many sterling bond investors have sated their appetite for its unsecured paper.

"Most of our assets are denominated in sterling. Pricing being equal, we prefer to take funding from sterling investors to keep...

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