A Brave New World for Corporate Bonds in the UK

This material has been prepared for informational purposes only and should not be construed as investment, legal, or tax advice. It does not constitute an offer, recommendation, or solicitation to buy or sell any security or other financial instrument, nor should any information contained herein be relied upon for the purpose of making investment decisions.

Past performance is not indicative of future results, and the value of investments may fall as well as rise. While the information contained herein is believed to be reliable, no representation or warranty, express or implied, is made regarding its accuracy or completeness.

The opinions expressed are those of the author and are subject to change without notice. They do not necessarily reflect the views or official position of the institution or its affiliates.

Introduction

London has been a centre for corporate bond issuance since the invention of the Eurobond market in the 1960s. However, whilst the market has kept the issuing banks busy, it has more or less by-passed UK private investors. The mythical Belgian Dentist was thought to be one of the end buyers of Eurobonds, but with denominations of £100,000 and a market dealing through market makers rather than a central exchange, offering no transparency to private investors, corporate bonds have stayed largely an institutional market to date, and we have been frustrated that we have been restricted in what we have been able to show our clients. 

Gilts, once a staple of private investor portfolios, fell out of favour after the high-inflation years of the late 1970s eroded their real value, and later as decades of falling interest rates left yields unattractive. That, however, reversed over the last four years, particularly as private investors have become aware of the attractive tax status of sterling bonds trading on discounts. The 0.125% gilt which matured recently on 30 January 2026, returning £41bn to investors, was reckoned to be over half held by private investors (although no accurate figures are kept) – private investors were attracted to this by the QCB rules which exempt capital gains in certain sterling bonds trading at a discount. 

The authorities have not made access to corporate bonds easy, but that is now changing. With households holding large pools of cash, channelling this into the capital markets is a core objective of the broader post-Brexit and Edinburgh reforms in the UK (as well as for the EU’s Capital Markets Union plans, though so far this has not resulted in changes affecting bonds). Authorities believe that this will strengthen market resilience, support growth and government financing, and improve outcomes for savers – whilst still managing consumer protection risks. Whether a rules change will actually change the market’s operation remains to be seen, but the signs are encouraging.

What is Changing?

From 19 January 2026, the FCA’s new Prospectus Rules (“Admission to Trading on a Regulated Market sourcebook”) came into force. The “Public Offers and Admissions to Trading Regime” removes existing bond denomination thresholds and introduces a single disclosure standard for all non-equity securities. This replaces the existing UK Prospectus Regulation and creates a single, consistent disclosure framework for all investors, making the market simpler and more inclusive. This removes two deterrents to the offering of bonds to private investors:

  • A new category of “Plain Vanilla Listed Bonds” (PVLBs) replaces the previous category of “non-complex bonds”, allowing floating rate notes to be offered, and making clear that “make whole” clauses are acceptable, which was previously uncertain.
  • PVLBs will benefit from the reduced product governance and reporting standards that previously applied only to bonds with a minimum €100,000 denomination, removing an important deterrent to issuing smaller denomination bonds.
  • The London Stock Exchange will flag bonds available to all investors as “Access Bonds” – this will include PVLBs – and there will be a single order book rather than separate retail and institutional books. So the ORB retail book will integrate into the main Order Book for Fixed Income Securities (OFIS).
  • A number of changes to the prospectus rules including a single disclosure standard: the ability to tap existing issues without a new prospectus being raised from 20% of the existing outstanding to 75%; forward incorporation of financial statements allowing for easy updating of prospectuses; as well as various other technical changes.

Will It Make a Difference?

The intention of the regulator – and behind it the Treasury – is clearly to ease access. Whether the issuing banks will be interested in taking advantage of the new rules is less clear. Cross border offerings into Europe will still be subject to the more restrictive EU rules as far as EU investors are concerned. In order to tap retail investor demand, issuing banks will have to be willing to pay the retail investor platforms a distribution fee. Given that spreads on issuing bonds are tight, that may not be attractive if they are confident of being able to sell bonds to their institutional clients without help. Some of the retail platforms in the past have been inflexible about making offerings of new shares available to private investors, presumably concerned about legal risks (though they have been happy to push funds!). Moreover, there is very little expertise amongst advisors, who have grown up in a culture dominated by equities and funds and have little bond expertise (unlike say in the USA, where Municipal Bonds remain a mainstay of retail investment).

We assume that change will happen first in the smaller issues, but it will take the ecosystem a while to adapt to the new opportunities.

With regards to the secondary market, matters should become more straightforward, though liquidity in corporate bond issues can be erratic.

At LGB & Co. we have already been bringing corporate bond issues to investors’ attention. We are encouraged by the changes which would further complement our proprietary deal flow and expand our offering as the market develops. 

Corporate Bond Markets in Good Health – But Maybe Not Discounting Macro Risk?

There are few signs of bond vigilantism here – so far. Although corporate bond spreads spiked up during the Trump tariff shock in the spring of 2025, they ended a little lower than at the end of 2024. Spreads matter because you can lose money in corporate bonds even if interest rates move down if spreads- the premium over equivalent maturity government bond prices- go up. Over the last few years the trend has been down:

2023 2024 2025 2026
UK AAA
40bps
34bps
34bps
34bps
US High Yield (ICE BoA)
334bps
292bps
282bps
286bps
Euro High Yield (ICE BoA)
395bps
311bps
270bps
259bps

(Source – St. Louis Federal Reserve. Option adjusted spreads)

US corporate borrowers raised more than $95bn from 55 investment-grade bond deals just in the first full week of January, the highest weekly volume since May 2020 and the busiest start to a year on record.

There is no useful measure of sterling corporate bonds, so the closest proxy is the Crossover Index of European sub-investment grade bonds, which have also been offering a progressively lower premium to government bonds ever since spiking up after the Ukraine invasion. They now offer (as measured by the iTraxx Crossover 5 year index) under 2.5% premium, not the lowest it has ever been (which was at the end of 2019, around 2%) but at the low end:

Taking the index back further, there are higher spikes than 2022 at the beginning of the pandemic, in the early stages of Global Financial Crisis, and again in 2011 around “Black Monday”.

Risk?

Looking at the corporate market does bring in more general considerations of spillover from equity market risk. This became painfully evident in the global financial crisis because the ability of firms to refinance through the equity market is an important assurance of creditworthiness, and if it goes, then the price of debt rises. So, perhaps we should at the low level of the VIX market, which measures volatility in the US equity market, and is seen as a proxy for risk aversion – it shows risk levels towards the low end of its recent range (though not particularly low in a longer perspective:

There is no need to rehearse the multiplicity of crises around the world, many of which have been exacerbated by the US President. At present, with equity markets around all-time highs and volatility low, they are not translating into a “risk off” mood. If for some reason that changes then corporate bonds are bound to feel some of the pain. In particular, the AI investment boom has entailed very large-scale raising of debt to finance Data Centres. A Bloomberg article on 2 February referred to the $3 trillion price tag for data centres and asked where the money would come from, suggested that the bond markets would be a major source – “projections are in the hundreds of billions of dollars”. Whilst this is largely a US phenomenon, if the US corporate bond market were to catch a cold, Europe and the UK would certainly be caught up.

If, however, you are following a laddered portfolio approach terming out your holdings and holding bonds to maturity, spikes in volatility may represent buying opportunities and market prices will not affect your overall return.

Choices

Our latest bond lists are available to view on the LGB Deal Hub. We remind you that these lists are not investment recommendations, instead they provide indicative offers and information about secondary corporate bonds from relatively well-known corporate names in GBP, USD and EUR where there is reasonable liquidity and which are tradable via the LGB Investments platform. As such, investors may want to consider these for their laddered fixed income portfolios and/or ISA portfolios. Please contact us if you would like to receive a firm offer and/or wish to trade, or wish to explore alternative options in bonds.

Why Not Just Buy A Bond Fund?

There are of course many well managed bond funds, and index-based ETFs. Investors should however bear in mind that the very heavy weighting of bonds issued by banks mean that ETFs will definitely and funds will tend to reflect that weighting. Whereas indexation – or closet index tracking – in equities will lead to a portfolio weighted towards the biggest companies, in bonds it leads to a portfolio weighted towards the heaviest borrowers – this has become a problem in the past, for example in the banks meltdown during the Global Financial Crisis, and investors may prefer to make their own decisions on risk.

In addition, funds do not qualify for any benefit from the QCB rules.

Conclusion

It is possible to pick up extra yield beyond that offered in the government bond markets by investing in corporate bonds, some of which may also qualify as QCBs in the same way as gilts do. The choice of offerings available to private investors will rise in the UK as a result of the recent reforms, and as issuing practice adapts to the new opportunities. One new opportunity will be to invest in floating rate notes as an alternative to leaving cash on deposit. With corporate bonds typically having longer maturities than MTNs, they are an important part of laddered portfolios and at LGB & Co. we look forward to being able to show investors a larger menu of investments.