Barclays Bank last week sold its first soft bullet benchmark covered bond, a move fuelled mainly by a desire to align its issuance with the format used by most UK issuers, an official at the bank told The Covered Bond Report.

Barclays last Tuesday (30 August) priced a Eu2bn three year soft bullet covered bond that came with a one year extension period. It is the first soft bullet benchmark Barclays has issued, although it has always had the ability to issue in soft and hard bullet format off its UK covered bond programme, according to Matt Dobson, director, capital issuance and securitisation, Barclays Treasury.

“Given the majority of UK issuers use soft bullet form, and investor feedback to date has, in general, indicated an ability to invest in either format, we have decided not to be an outlier in this respect,” he said, “especially given the impetus to move towards a more standardised UK covered bond offering.”

Using a soft bullet format has some marginal liquidity benefit to issuers, he added.

The switch to a soft bullet structure was picked up on by UniCredit senior analyst Florian Hillenbrand, who noted that Barclays is the first issuer to have turned to the format after having originally opted for hard bullet redemptions and that the switch raised questions about the impact of what he described as a commingling of redemption features.

Barclay’s Dobson told The Covered Bond Report that the soft bullet trade has no prejudicial impact on the repayment of outstanding hard bullet bonds (from a pre-maturity liquidity ledger).