Since the last monthly update, the outlook for inflation and interest rates fell during late November but has since bounced back in December, with the 5 and 10-year swap rates back at 4%. Expectations are that businesses will pass on higher National Insurance and Minimum Wage costs and service CPI remains stubbornly high.
Despite 3 of the 9 MPC members voting for a rate cut in December, the outlook for rate cuts in 2025 hasn’t moved much since last month, with two cuts expected in 2025.
The strength of the US economy is another factor influencing the higher rate outlook, with UK gilt yields broadly tracking the higher US Treasury yields; the 30-year gilt is 5.1% as we release this update.
CPI rose to 2.6% in November from 2.3%, with transport costs the main driver. Service CPI held steady at 5.0%. Both readings were above the Bank of England’s expectations.
Demand from investors remains, with bond spreads back to record lows helping to offset some of the rise in gilt yields. The gilt yield curve rises steeply from 4.6% at 13 years, highlighting the relative attractiveness of shorter-dated issuance.
Implications for clients
The higher inflation outlook will moderately improve rent increase projections with September 2025 CPI currently projected at c. 2.5%, although a higher cost base is likely to more than offset this; most clients are describing the 2025/26 budget process so far as ‘challenging’.
The higher long-term cost of capital makes investment decisions even more challenging, with Housing Associations facing the difficult choice between subsidising new development schemes and maintaining financial resilience. The cost of re-financing future debt maturities is another factor to consider when assessing capacity to invest.
Recent client activity
There have been several portfolio restructures and new funding transactions completed in November, with case studies soon to roll out on our website.
Additonaly, the banking market continues to be supportive of the sector, evidenced by recent deals that lowered margins across banking portfolios creating material value for our clients. Support is also evidenced by bank cooperation to amend loan covenants and reduce risk for Housing Associations. Where legacy long dated low margin facilities are in place, some banks seek to shorten tenor and increase the margin moderately, whilst others look at restructure and can offer 10 years or more.
To learn more about our work in the affordable housing sector, click here.
The UK higher education sector stands at a crossroads. Despite its global reputation, mounting financial challenges—frozen tuition fees, rising costs, and a decline in international students—are threatening its stability.
Centrus’ latest report, In Focus: The University Challenge, explores the financial pressures facing universities and offers strategic solutions to build resilience. From diversifying revenue streams to innovative funding models and decarbonisation strategies, the report highlights actionable pathways to a sustainable future.
Download the full report to explore how tailored hedging solutions can help navigate today’s volatile energy landscape. For further insights, please contact Russell Schofield-Bezer, Senior Advisor of Higher Education at Centrus.
Since the last monthly update, the market has shifted to a more inflationary outlook and projection of higher interest rates for longer. The Government’s commitment to investment in the Autumn Statement is a key driver to the change in outlook. The US Election added to the markets conviction with President Trump’s policies considered inflationary across the world economy.
The rise in Employers NI Contributions will add c. 3% to Housing Association staff costs, with most of the increase caused by the fall in the threshold to £5,000 from £9,100. The lower the average cost per employee, the greater the cost impact.
October CPI of 2.3% was higher than the 2.2% expectation, with the jump from 1.7% in September due to the c. 10% increase in the energy price cap from 1 October 2024.
Service inflation of 5.0% and wage growth of 4.8% reinforced the market outlook that inflation will remain persistently above 2% requiring the Bank of England to hold rates for longer.
Prior to recent events and data releases, the inflationary outlook had dampened, and we saw a low in swap rates in September (3.4% for the 10 year). The swap curve rose for 6 weeks from that low in response to the revised inflationary outlook, and the 10-year swap is now steady at 4%. Gilt yields followed a similar path with the 30-year gilt yield up to 4.9%.
Implications for clients
The higher inflation outlook will moderately improve rent increase projections with September 2025 CPI currently projected at 2.8%. However, the rise in Employer NIC and variable rate projections will more than offset this modest gain.
As tempting as it is to speculate on future interest rate movements, we remind clients that interest rate risk management focuses on exposure to variable debt, headroom on covenants and policy limits. There is an equal chance the market projection will move up or down.
With the spread between gilt yields and swaps back at a high (the 10-year gilt yield is c. 50bps higher than the swap), we anticipate a continued focus on new funding from the bank market and recommend clients remain aware of the capacity limit for their banking portfolio and review short term maturities.
Recent client activity
Centrus is busier than ever, actively advising clients on hedging and risk management across its core sectors of social housing, infrastructure, and other essential services. The demand for this expertise is being driven by heightened market volatility, the maturity of existing hedging arrangements, and a growing focus on achieving greater certainty around the cost of capital.
In addition to hedging, mergers and treasury strategy execution remain particularly active areas. Loan portfolio restructuring continues to play a pivotal role, delivering tangible value to clients and creating improved covenant headroom.
To learn more about our work in the affordable housing sector, click here.
We recently hosted a Titan User Day, bringing together clients for an inspiring day focused on optimising the use of titanTreasury. The Centrus analytics team, along with our trusted partners at 3V Finance and others, led workshops throughout the day. titanTreasury is a specialised Treasury Management System (TMS) that provides financial departments and treasurers with advanced tools for managing operational market risk (including interest rate, FX, and commodities), as well as credit and liquidity risks.
Key Topics Covered:
2024-2025 titanTreasury Roadmap We provided a glimpse into the enhancements planned over the next two years, reinforcing titanTreasury’s role as a premier treasury and risk management system.
Centrus Support Model and New Ticketing System We introduced our new, streamlined ticketing system, designed to simplify support requests and ensure quick, efficient assistance.
Feature Demonstrations: Cash Management and Budget Reporting Attendees gained hands-on insights into core titanTreasury features like cash flowmanagement and budget reporting, which enable efficient, real-time treasury management.
IT Certification and Security A session was dedicated to IT security and certification updates, highlighting titanTreasury’s robust compliance controls and advanced data security measures
Advanced Capabilities: XvA and Hedge Accounting Attendees were introduced to titanTreasury’s XvA and hedge accounting tools, essential for managing financial risks and meeting regulatory standards.
Customisable Technology titanTreasury’s adaptable platform allows clients to tailor the system to meet their unique needs, whether through workflow adjustments or custom reporting.
Expanding Partnership with ICD
The day was also brought to you by our partners at ICD, whose ICD Portal provides a streamlined platform for treasury investments, offering access to money market funds, ESG products, and short-term investments. Click here to learn more.
Thank You for Joining Us
We are grateful for the active participation and insightful feedback from our clients, which continue to drive our mission to innovate and collaborate.
To learn more about titanTreasury, please contact Gilles Bonlong, Director at Centrus.
We asked six individuals who joined Centrus this year, either through graduate roles or internships, about their experiences – and the responses highlight the valuable personal and professional growth opportunities Centrus offers. From the moment you start, you will feel welcomed into a collaborative and inclusive environment that values authenticity and teamwork, allowing you to form meaningful connections while building a strong foundation for your future career.
Openness and Teamwork:
During a Centrus internship or graduate role, emphasis is on teamwork across the various teams. This environment combines mentorship with the freedom to take charge of tasks, offering guidance while fostering independence. This approach not only enhances skill development but also boosts confidence, ensuring support is available at every step.
Saanvi, London Intern 2024 echoes this experience, noting, “What stood out most was the collaborative nature across teams, especially on deals. The Real Estate team mentored me effectively, balancing guidance with independence, which allowed me to grow both personally and professionally.”
Career Clarity:
A role at Centrus shapes your career aspirations by exposing you to diverse roles and responsibilities. Many interns and graduates have transformed broad interests into passions for specific sectors like real estate, infrastructure, or crucial areas such as risk advisory. The experience clarifies potential career paths and helps you to discern the skills and knowledge you want to enhance further.
Aryana, London Intern 2024, reports, “Before starting I had a broad interest in finance, but this experience allowed me to dive deeper into various sub-sectors. Working on different projects, from the initial research stage to the final presentation, allowed me to learn about the complexities and strategic thinking involved in corporate finance.”
Sinead, Dubin Intern 2024, reflects Aryana’s growing interest in corporate finance, sharing “The world of corporate finance has completely opened up to me. I definitely have a clearer picture of the different careers available, particularly how broad advisory is. My interest in risk advisory has grown, and I have a clearer idea of the courses and professional exams I plan to take beyond university.”
Proactive Learning and Engagement:
At Centrus, internships and graduate roles encourage you to take initiative. By immersing yourself in projects, actively contributing to the team, and demonstrating a keen willingness to learn and ask questions, you can maximise your experience. The team is always ready to support your learning journey.
Kristy, London Intern 2024, advocates for “being proactive and fully engaged in the experience. Don’t hesitate to ask questions and seek help – the team is approachable and supportive. Contribute actively to projects and embrace every opportunity. Enjoy the journey and let your enthusiasm make a positive impact!”
Andre, Dublin Graduate 2024, supports this, advising, “Don’t be afraid to ask questions, my experience here has been made much better having the support of the team answering my questions. If Centrus is visiting your university, attend the guest lecture or the job fair. I got this opportunity by interacting with the team when they visited my university.”
A Rewarding Experience:
At Centrus, our core values – Bold, Authentic, Service-Driven, Impactful, and Supportive – are at the heart of everything we do. The Centrus interns and graduates feel valued, and their contributions truly matter. Leading to the program being recommended for its practical experience, professional networking opportunities, and exposure to the dynamic finance industry.
Luke, Dublin Intern 2024, shares, “They welcomed me with open arms and as one of their colleagues from the beginning. They were fun, kind, respectful and helped me to truly enjoy this experience.“
Dublin (left to right): Andre, Luke, SineadLondon (left to right): Kristy, Saanvi, Aryana
At Centrus, we are committed to fostering a culture of diversity, inclusion, and excellence in the finance industry. If you’d like to find out more about working at Centrus, please contact recruitment@centrusadvisors.com
Power price volatility is reshaping risk management strategies across industries. As the energy market faces unpredictable fluctuations, hedging has become essential for managing costs and maintaining stability. In recent years, the energy landscape has been marked by frequent macroeconomic shocks—from geopolitical conflicts to accelerated technology demands—that directly impact energy prices.
Centrus’ latest report, In Focus: Risk Management in an Era of Power Price Volatility, delves into the drivers behind these pricing shifts and offers actionable strategies for businesses. This report highlights:
The rise of power purchase agreements, fixed-volume swaps, and carbon credit strategies
Key factors influencing market volatility, such as geopolitical shifts and technological advances
Practical approaches to building and managing a robust hedging framework
Download the full report to explore how tailored hedging solutions can help navigate today’s volatile energy landscape. For further insights, please contact Mark Taheny, Managing Director at Centrus.
The September CPI of 1.7% is disappointing for rent growth, however lower interest rate projections will help the significant sector re-financing requirement over the coming years. The 10-year swap was 4.3% a year ago, and now sits at 3.7%.
The sharp month-on-month fall in service inflation to 4.9% from 5.6%, along with signs of weakening wage growth is significant. The Bank of England may revise down its inflation projections again, and the market expects successive monthly rate cuts in November and December, with further falls projected.
Swap rates and gilt yields rose through September from a recent low early in the month, with the 10-year swap rising from 3.4% to over 3.8%. Following the lower-than-expected inflation reading, it fell back to 3.7% and may continue to retrace.
We wait in anticipation for the Autumn Statement on 30th October. It will be interesting to see if the OBR revises projections, and how gilt yields react to the Chancellor’s announcement.
Implications for clients
The 1.7% CPI release was below our business planning assumption of 2.2% and below the Bank of England CPI projection.
With the potential for another market moving Autumn Statement and two remaining MPC meetings for 2024, we may see increased volatility as we run into Christmas. We’ll be into risk buffer discussions and business planning season before we know it.
Hedging interest rate risk and having more certainty on cost of capital for decision making can avoid the need for excessive risk buffers in discount rates and interest budgets.
There will be more to get our teeth into next month, until then, we hope for no further escalation in global instability.
Recent client activity
At Centrus, we are actively engaged in supporting our clients with strategic financial initiatives, from loan restructuring to exploring innovative financing solutions. Recent activities include:
Southern Housing EMTN Programme and Sustainability Finance Framework: Newbridge Advisors recently advised Southern Housing to help successfully complete its first issuance from a £1bn European Medium-Term Note (EMTN) programme and Sustainability Finance Framework. The £250m issuance in September saw significant demand from investors, reflecting the growing appetite for sustainable investment opportunities in the housing sector. This issuance marks an important step in aligning housing finance with broader sustainability goals.
Loan Portfolio Restructuring: Restructuring loan portfolios has become a key focus for many of our clients, particularly in light of the current interest rate and banking market environment. Centrus has been working closely with several clients to renegotiate loan terms and improve pricing, providing opportunities to optimise their financial positions and reduce costs, ensuring more robust long-term financial stability.
To learn more about our work in the affordable housing sector, click here.
Correction: This article has been updated to state that Newbridge Advisors advised Southern Housing on their debut issuance under their EMTN, rather than Centrus as incorrectly referenced in previous version.
H1 2024 saw a significant rise in debt capital markets issuance. European corporate bond issuance totalled €416bn, a 68% increase compared to H1 2023. This surge can be attributed to several key factors:
Peak Rates: After an aggressive interest rate hiking cycle, rates have started to decline from their peak, reducing the cost of new debt issuance and encouraging borrowers back to the market. Some borrowers who have not had an urgent requirement to refinance postponed issuing new debt until rates started to fall.
Tight Credit Spreads: Credit spreads remain at or near historic lows, reflecting a demand/supply imbalance. Despite the increase in issuance. Investors are eager to lock in current yields before central bank rate cuts, demonstrated by net inflows into investment-grade credit funds being positive every week this year except one, leading to strong demand and keeping a lid on credit spreads. Markets have consistently overlooked the geopolitical and economic turmoil of 2024, which might have otherwise caused spreads to increase.
Compressed Year: Concerns about potential volatility and uncertainty due to the upcoming US election in November have prompted corporates to accelerate issuance into the first half of the year. In the investment grade bond market, it is estimated that 75% of the expected 2024 financing has already been issued, compared to the typical 50% seen by mid-year.
Growth of Private Credit: The growth of the private credit market continued in H1 2024, with a number of fund managers raising large funds targeting private credit strategies. These include Goldman Sachs Asset Management raising $13.1bn for its fifth and largest senior direct-lending fund, Wes Street Loan Partners V. Ares Management closed a record-breaking $34bn private credit fund, the largest ever raised.
Private credit has been a growing asset class since the early 2010s, with accelerated growth in the past three years. The growth of private credit was initially focused on the leveraged finance markets as traditional banks retreated from this space due to increased regulation, however, it is increasingly moving into investment grade and real asset markets. For investors, private credit offers what were the equity returns of two years ago in the previous rate environment, but for a lower risk position in the capital stack and usually with a running yield on their investment. Despite the overall increase in commitments, investors remain underweight relative to their targets. The private credit market, currently at $1.7T, is expected to reach $2.8T by 2028.
For borrowers, private credit offers a more flexible alternative to public markets and bank lending, in exchange for a modest price premium.
UK Pension Market Reforms: Last year, the UK Chancellor announced the Mansion House Reforms, including an agreement between nine of the UK’s largest defined contribution pension providers to commit 5% of AUM to unlisted equities by 2030. New Chancellor Rachel Reeves recently met with the large Canadian pension schemes to learn from their model. These schemes are more focused on private markets; for example, the Ontario Teachers’ Pension Plan has only 7% of its assets in listed equities, compared to 60% for traditional UK pension funds.
Booming Risk Transfer Market: Pension Risk Transfer market continues to grow, with both UK and US markets on track for their biggest-ever years. The market across the UK and the US is forecast to exceed £250bn in the next 3 years, with a significant increase in the number of large pension plans seeking a risk transfer as deficits are reduced, given the rise in rates and a desire to transfer before rates fall again. This comes as the transfer market for smaller schemes also continues to grow, with the number of transactions below £100m doubling from 2020 to 2023.
Sector Focus
Social Housing The increase in interest rates has made housing associations hesitant to lock in long-term debt capital markets funding, with housing associations some of the longest-dated issuers in the market and therefore extremely sensitive to rates. Despite strong investor demand for long-dated paper offering attractive spreads in the 15+ year range, borrowers have shown a preference for short-dated facilities, leading to a surge in shorter-dated bank borrowing. The number of debt capital markets deals in H1 2024 was down 25% (39 vs 52 the previous year), however, the overall deal value of £4.1bn was broadly flat due to several large deals, such as Places for People’s ‘biggest ever’ £500m bond.
Strong investor demand for social housing debt has resulted in greater flexibility and creativity in debt capital markets offerings, including more flexibility on charging property security, floating-to-fixed structures, and shelf facilities. With long-term rates reducing, longer-dated, covenant-light debt capital market borrowings can represent good value. From our discussions with book-runners and recent transaction precedents, it appears there is a negligible premium for sub-benchmark issuance in the public bond market – representing an interesting alternative to private placements or bank financing. There is also a strong investor appetite for floating-rate and inflation-linked private placements, offering diverse structuring options for borrowers. Centrus was named the leading arranging of social housing transactions in the year to March 2024*. Some examples of the transactions we arranged are shown below:
Advised Tai Tarian on raising £95m of new bank and capital markets funding to enable full refinance of existing debt
Arranged Anchor’s first £150m shelf facility
Advised Welsh Housing Partnership 2 on a new £38m Private Placement and £30m Government Loan saving £2m per annum
Advised Jigsaw on £803m of new / restructured bank and Private Placement funding, a £50m PP and MRI covenant removals
Real Estate The real estate market has been particularly impacted by rising interest rates, putting pressure on serviceability and valuations, combined with changing occupier demands in a post-COVID world. Lenders have responded with more creative approaches to debt structuring to meet serviceability requirements and some have softened serviceability covenants to adapt to the new rate environment.
While public issuance was very limited in H1, it did see the return of strong names to the market:
Vonovia sold an €850 million 2034 social bond that landed 40bps inside IPT at +170bps (4.25% coupon), despite announcing a €6.76 billion loss for 2023 only a week earlier. Suggesting capital markets are back open to strong names.
Aroundtown completed their first issuance since 2021 €650m 2029 issuance drummed up €4.35bn of orders
P3 completed a €600m 2030 at MS+207bps (43bps tightening) with final demand of €3bn
Logicor €500m 2029 tightened c. 40bps from MS+153bps from €2.2bn of demand
There is a strong lender appetite for living sectors such as PRS (Private Rented Sector), BTR (Build to Rent), PBSA (Purpose Built Student Accommodation), senior living, and industrial sectors, such as warehouses and last mile logistics.
Crossover real estate/infrastructure sectors, such as cold storage and data centres, have also seen strong appetite, benefiting from megatrends like energy transition, digitisation, and changing consumer behaviours. Centrus’ Corporate Advisory team comprises both real estate and infrastructure professionals who are able to leverage lending appetite across both markets to secure the optimal financing terms for assets in crossover sectors.
Centrus recently advised Peel on £45m NRE financing, a real estate business focused on assets linked to low-carbon energy generation. Please click here for more information.
Infrastructure & Renewable Energy
Infrastructure has remained a bright spot and we’ve seen an increase in the overall value of transactions. Despite the volatility of the past two years, infrastructure fundamentals remain strong, particularly projects with inflation pass-through mechanisms. The demand for inflation-linked debt is strong, with limited supply driving borrower-friendly pricing.
Thames Water has frequently been in the headlines recently and was downgraded to junk status by Moody’s and S&P. Despite this volatility, the UK water sector managed to close several important transactions in July, alleviating fears of contagion risk. Severn Trent and South West Water both issued 14-year and 16-year bonds, respectively. These transactions demonstrate that the UK water sector remains open for business, with liquidity available for UK water companies in public debt markets.
Despite the value of deals being down in 2024, there is a strong appetite for renewable projects amongst lenders, with banks being highly competitive, offering tight pricing and long tenors, although the volume of renewable transactions is down year on year. Local banks have proven to be the most competitive, especially for standard solar, wind, and battery energy storage system (BESS) projects. We have seen an increased acceptance of merchant risk from banks with structures including merchant tails of increasing length with appropriate structural mitigants. We have seen increased competition from private capital who are able to offer longer tenors and accept more merchant risk which can be attractive to borrowers given current PPA terms. With power prices down from their peak and rates up, the leverage available has reduced.
Battery storage continues to be an interesting sector and we have seen significant activity in EV charging infrastructure. The first few large deals in these areas have been seen in H1 2024:
Antin-backed Powerdot raised €165m from 6 banks to finance its EV infrastructure roll-out in Portugal
Zunder has raised €225m to deploy over 3,000 charging points in Spain, France, Italy and Portugal
Cespa has been granted €150m by the European Investment Bank (EIB) to support the rollout of its charging network.
Centrus is thrilled to announce the opening of a new office in the heart of New York City now operating alongside our established bases in London, Dublin and Athens.
Our new base is in Rockefeller Plaza under the leadership of our Head of North America, Managing Director Adrian Li. With seven years of experience at Centrus and over 18 years advising clients across the UK, Europe and North America, Adrian brings a wealth of expertise to his new role.
In a recent video below, CEO Phil Jenkins and Adrian Li discuss the significance of this expansion and the opportunities it presents for Centrus and its clients.
This strategic move is a natural progression for Centrus and a significant milestone as we solidify our position as a global provider of corporate finance solutions for real assets and essential services.
For over 12 years Centrus has served clients across the UK, Europe and North America with services spanning Risk Advisory, Debt Advisory and Distribution, Corporate Finance, M&A and Equity Raising. The opportunity in the US is a huge one for us and our clients in our sectors across Affordable Housing, Student Accommodation, Operational Real Estate, Infrastructure, Transport and Energy Transition.
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