Covered Corona Bonds

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  Cover Page

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  Evidence

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  A simplified structure

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  Fortem Direct

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  A worked example

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  The idea

Inspiration

We developed the plan for the UK government in collaboration with investment banks, property partners and other advisers

What it does

With support from EU governments, a Bank Support Fund can borrow money, indexed to inflation, paid back over decades, at (roughly) positive 0.5% in US dollars or at negative 1.5% in either sterling or euro. At the same time, BSF can invest the proceeds in property generating positive 5% in any of those currencies

Covered Corona Bonds: Residential rent emerges as a strip, comparable to a fully amortising inflation linked bond or to the liabilities of a pension fund. It would not be remarkable for UK pension funds to invest five billion pounds in inflation linked bonds every three months. Our proposal exploits known unmet demand for these securities. The bonds represent a promise to pay an aggregate of fifty million pounds of 2020 spending power, annually for sixty years.

The first billion pounds of proceeds we would invest in property that generates sufficient rent to “cover” the obligation to bondholders (a yield of 5%). Fortem could orchestrate this process

The remaining four billion pounds, converted to any currency, could be invested as equity in targeted European banks, enabling those institutions to leverage this investment by a factor of more than ten to one

How I built it

Worked at it a while

Challenges I ran into

The principal challenge is getting governments to think big

Accomplishments that I'm proud of

The formating looks good

What I learned

The warm glow of a weekend's work well spent

What's next for Covered Corona Bonds

We hope our leaders read this proposal and ask themselves what they have to lose!

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