UK lender HBOS has ruled out selling new bonds backed by residential mortgages, as investors spooked by sustained turbulence in the capital markets demand high premiums for asset-backed securities.

HBOS traditionally aims to sell benchmark-sized deals of between £4bn (€5.6bn) to £5bn in each half of the year, but five months of turmoil has put paid to such issuance plans, forcing the bank to reconsider its funding options in other markets.