Scottish National Party (SNP) leader Humza Yousaf’s plan for Scotland to wade into the international bond markets, revealed this week, has drawn a quizzical response. Quite aside from matters of pricing or credit rating, debates rage over whether to call the securities Tartan Bonds, or boans, or indeed Kilts.
The plans seem vague and none of the Scottish politicians GlobalCapital approached for comment offered much of a response at all, let alone further detail. No one is quite sure whether the SNP will tak’ the high road, or the low road.
The bonds are set to fund affordable housing, a worthy cause but almost certainly not what this week’s announcement is really about.
Indeed, as guest columnist and former EuroWeek news editor Bill Blain writes, the bonds are nothing more than “political bluff and bluster”. The SNP has had a torrid year, to put it lightly, and national sentiment for independence is far from the post-Brexit highs it reached just a couple of years ago.
As one Scotland-based bond market participant put it: "I think it’s a nice distraction for the SNP after a disastrous summer. It gets some headlines and puts independence back in the spotlight. Today [October 19] is the day that Nicola Sturgeon [Yousaf's predecessor as Scottish first minister and SNP leader] announced in the summer of 2022 would be the day of the second referendum and as a resident of Edinburgh I’m not going to the polls after work."
Images of the police leading Sturgeon from her home will haunt the dreams of those who thirst for Scotland’s independence for years to come.
So, it is no surprise that Yousaf has taken drastic action to change the narrative a little, telling the SNP's annual conference that printing bonds would "demonstrate the credibility to international markets that we will need when we become an independent country".
But the SNP must tread carefully for the rest of this parliamentary session, which ends in 2026, and is its self-imposed deadline for issuing Kilts.
Entering the bond market is no small feat, and the list of unanswered questions surrounding Scotland’s foray is much longer than those that are resolved. Questions of spread, political and credit risk, debt-to-GDP ratios, pricing and even currency are piling up and that's before any roadshows take place.
And of course the SNP has no great pedigree when it comes to finance. In 2014, the year of Scotland's first independence referendum, one of the key concerns for those in the ‘nay’ camp was the lack of a concrete plan on how to handle the economic divorce from the UK and the City of London.
At the time Scottish banks and asset managers made it very clear that they would not stick around long enough to watch it unfold.
Talk of Kilts is bold. The reputational risk that would accompany failure would be catastrophic. Anything short of an exceptional outcome that does not hobble Holyrood's finances will have those behind it reaching for more than just a dram.