News

3rd Apr

Morgan Stanley launches new Inflation Linked Income Bond on ORB

Linear Investments has announced the launch of its first investment grade retail bond for Morgan Stanley via its recently launched BondMart portal (Retail Bond Expert 27th March) and listed on ORB.

The company's research suggests that inflation linked bonds are back in demand, particularly in the context of falling ten year Gilt yields and increasing RPI. 

The offer period of the Morgan Stanley bond is from 3rd to 16th April 2013, is subject to a cap of  £50million and the issuer reserves the right to close the offer early should the issue become oversubscribed. 

The bond will pay a coupon of 2.4% per annum in the first year rising by the change in rate of RPI in subsequent years. Coupons are paid semi-annually and the tenure is 10years. Linear Investments Ltd is acting as sole promoter of the bond.

BondMart seeks to address the current conundrum in the market by issuing inflation-linked bonds that are both attractive as an investment and are suitable for inclusion in a retail investor's portfolio.

Currently, ‘high yielding’ fixed rate bonds look attractive and arguably hedge against the effects of inflation over the life of the bond.  However, detractors point to the fact that these products are generally sub-investment grade or unrated, and question whether they meet the suitability requirements of often unsophisticated retail investors?

“This is a breakthrough for retail investors offering them the diversity and choice normally enjoyed only by institutional investors.” –Phillip Gilbert

In the past, inflation linked bonds have been issued mainly by utilities (whose revenues are ‘pegged’ to inflation) or the Government in the form of Gilts.  For other issuers, the risk of inflation related coupons and having to enter into complex hedging arrangements (with inherent risks of mis-selling of interest rate swaps) make the issue of inflation linked bonds unattractive. Also, historically low interest rates make fixed rate issues considerably more attractive for those wanting to borrow. 

Linear Investments' Philip Gilbert believes that the new BondMart portal is the answer, “This is a breakthrough for retail investors offering them the diversity and choice normally enjoyed only by institutional investors. The initial emphasis on inflation-linked bonds reflects the demand shown by retail investors and distributors for these types of products.”

Amongst its objectives, BondMart plans to:

  • issue a continuous supply of bonds suitable for retail investors.
  • restrict supply to investment grade issuers only.
  • offer diversity and choice only normally enjoyed by institutional investors.
  • reflect the demand shown by retail investors  - initial issues will be inflation linked.
  • provide liquidity through independent market makers.

BondMart has appointed a number of Authorised Distributors and brokers and financial advisers will be able to buy the bonds through this network.

Retail Bond Expert invites investors and industry professionals to join the debate and consider the relative attractiveness and likely impact of inflation-linked investment grade retail bonds.

For more information contact:

Philip Gilbert:
Tel: +44 (0) 20 3603 9823 / +44 (0)777 062 1380
Email: - pgilbert@linearinvestment.com
Website: - www.linearinvestment.com/bondmart

John

Posted on 03/04/2013 14:52:14

Who can I buy these bonds through? Linear?

Graeme Foster

Posted on 03/04/2013 15:46:29

Hi John, I'm sure that by contacting your financial adviser/wealth manager or Stockbroker they could arrange the trade. There is also a link at the bottom of the article to Bondmart where they offer a list of approved distributors for each issue

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