However as potent vaccines begin to be deployed, the timeline of a return to normality has compressed dramatically. Central banks remain prepared to see this period through and are not fazed by the eventual debt piles that will be accumulated.

The US Government stimulus package is making its way through the system and the Federal Reserve remains committed to maintaining its bond purchase program, the transition to a Biden administration is unlikely to affect this. US corporates have enjoyed issuing into these record low funding costs and 2020 will have seen more than $1.7 trillion in total. Next year will likely see reduced issuance (Barclays forecast a 35% drop) which will be supportive for spreads.

The EU’s stimulus package appears to be making progress too, not before time. Projections for individual EU governments’ borrowing requirements are almost as impressive as ours. It is interesting that the German Finance Agency’s 2021 funding plan is for EUR 250 billion, net EUR 143 billion, but much more skewed away from short term issuance through bills towards longer dated bonds to take advantage of minimal term funding costs. It is worth pointing out that the UK DMO have been pursuing this strategy for years and the average maturity of our >£2 trillion national debt is over 15 years, which is double the life of the rest of the G7’s debt stock.

With minimal time left, we are supposedly on the verge of a Brexit deal, let’s see what happens. In the meantime, the BoE kept everything unchanged and the MPC has its collective fingers crossed, ‘the UK economy (at the moment) is developing in line with its expectations’. However, they warn that a no-deal Brexit would be costlier than COVID-19. 2020 will be by far and away the biggest ever year for Gilt sales at about half a trillion. In the meantime, their corporate bond holdings (only 20 billion), are to be aligned with 1.5 degrees of global warming by 2030, good luck quantifying that.

The Sterling Corporate new issuance market has wound down for its seasonal break but spreads remain very well supported especially in the face of lack of supply. Of the 74 fixed new issues issued in 2020, 92% are tighter than reoffer with an average spread uplift of 43bp.