The German company has started selling bonds in pounds after borrowing costs in the currency climbed by the most in two months amid speculation U.K. interest rates will increase sooner than expected.
According to a person familiar with the matter, BMW is selling 300 million pounds ($480 million) of four-year notes to yield 85 basis points more than U.K. government debt. The average yield on sterling-denominated investment-grade bonds rose 8 basis points to 3.6 %, the biggest jump since Sept. 5, as Bloomberg bond index data shows.
“The U.K. is one of the markets that’s been growing the most,” said Mondher Bettaieb-Loriot, who manages the equivalent of about $1 billion at Vontobel Asset Management Ltd. in Zurich. “BMW may have decided they need the funds in place to offer the financing to meet demand from buyers and they want to get it done before yields go up.”
With U.K. unemployment forecast to fall to a four-year low of 7.6 % in the third quarter, companies are speculating the Bank of England will increase rates earlier than 2016. That’s when the central bank projected the jobless rate to reach 7 %, its threshold for tightening policy.