Volumes

29.  Figure 30 below shows that in the last quarter of 1998 almost 75% of the new issues were for AAA names, and 90% for AAA and AA names. This compares with the first half of the year where AAA fixed rate issuance was less than 50% of the total.

30.  It is highly unlikely that in Q4 1998 or Q1 1999 any large issue (over £500 million) could have been launched at an aggressive price without a AAA credit rating. Indeed, even in calm market conditions it is difficult to launch very large amounts of bonds into a single part of the yield curve. Figure 31 below shows a distribution of tranche sizes in the sterling market (fixed rate and floating rates) since 1997. It is clear that issues in excess of £500 million are rare.

31.  Two other large sales of UK Government assets to the private sector had been funded in the bond market in the last few years, with funding taking place on a single day. These were Annington Homes which launched over £900m of AAA-rated bonds in three different tranches to fund the purchase of MOD Married Quarters Estate and FRESH, the vehicle used to purchase the Housing Corporation Loan Portfolio. FRESH raised over £1,000 million of bonds on one day in 8 tranches, the largest of which were AAA-rated. Both Annington Homes and FRESH were launched into comparatively benign market conditions.