This post has been amended. Please also read: National Grid Bond Issue: Confusing to say the least
Big news for savers in the form of todays announcement from National Grid where they are looking to issue the very first corporate bond linked to inflation!
Big news for savers in the form of todays announcement from National Grid where they are looking to issue the very first corporate bond linked to inflation!
Regular readers will be aware of my liking for National Savings Index Linked Savings Certificates. Well, the headline numbers for the National Grid version compare very favourably:
- minimum £2000 investment (£100 increments thereafter).
- 10 years to maturity
- bi-annual interest payments of 1.25% adusted for RPI (before tax)
- eligible for holding within ISA's/SIPP's (provider allowing)
- final payment will be guaranteed face value of bond plus an additional RPI adjusted payment. If inflation is negative then face value will be paid.
- they should be tradeable like any other corporate bond.
The offer is open until 29th September unless demand proves greater than availability.
National Grid is a BBB+ rated company but as many analysts are aware, the UK cannot really function without its infrastructure and it is much too costly for a competitive alternative to be put in place even if the political and planning will was there to enable it.
The bonds will obviously fluctuate in the market as supply and demand forces take effect. This might present a trading opportunity but if you were to buy and hold to maturity then there should be no stamp duty or dealing charges.
Holding them within an ISA or SIPP should also shield you from any income or capital gain tax liability as well.
The bonds will obviously fluctuate in the market as supply and demand forces take effect. This might present a trading opportunity but if you were to buy and hold to maturity then there should be no stamp duty or dealing charges.
Holding them within an ISA or SIPP should also shield you from any income or capital gain tax liability as well.
Elsewhere UBS has downgraded National Grid to Neutral from buy (www.sharecast.com: Broker snap: UBS downgrades National Grid on share price strength) following the company's outperformance of the utility sector this year (something the virtual portfolio has really appreciated), the fact that it has reached the brokers target price of 615p, and no new factors to drive further outperformance. UBS speculates that new catalysts will come from the US side of the business but not until the second half of 2012.
However, as mentioned earlier UBS is an analyst that recognises the strengths of National Grid's business along with the further fact of no exposure to sovereign debt.
National Grid @ 619p, -3p (-0.48%)
Publication of final terms:
- http://www.rns-pdf.londonstockexchange.com/rns/1536O_1-2011-9-13.pdf
National Grid @ 619p, -3p (-0.48%)
Publication of final terms:
- http://www.rns-pdf.londonstockexchange.com/rns/1536O_1-2011-9-13.pdf
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