Page 40 - DIY Magazine March 2018

RETAIL BONDS, REMEMBER THEM?
‘....And you thought that we were faking, that we were all just money making.....’
Retail Bond Expert’s Mr Bond looks back wistfully
at the hopes and expectations for the London Stock Exchanges Order Book for Retail Bonds – and perhaps to his days in bond-age trousers!
Retail bonds or, more accurately, corporate bonds issued in small denominations, were greeted with a fanfare of approval in February 2010, when the Royal Bank of Scotland launched the ‘Royal Bond’, a 10-yr 5.1% bond.
Mr Bond observes, somewhat cynically that, ‘as RBS was nationalised a year earlier this could be viewed as either incredibly cheap funding for a bankrupt business, or a 10-yr ‘Gilt’ with a yield pick-up’. Take your pick, it kick-started what became know as the Order Book for Retail Bonds (‘ORB’), the LSE listing for these securities. The halcyon days for issuance on ORB were 2011 and 2012 when there were circa 23 new issues, almost one a month.
Since then issuance has declined, last year there was hardly any issuance and no new issuers to the market, this year there has been no issuance other than a US$ issue from Burford Capital. Mr Bond wonders just now many actual retail investors bought that one?
Is there any point picking over the corpse that appears to be what is left of ORB, and asking why there are so few new issues?
It’s all been said before; too expensive in terms of legal fees to issue a bond; the banks have returned to the market and offer cheaper funding with no execution risk;
I AM MORE INTERESTED IN THE RETURN OF MY MONEY THAN THE RETURN ON MY MONEY
regulators became overly protective and issuers found it too difficult.
Some issuers are still trying evidenced by the aborted issues from Blue Zest and Select Property Group; up to £400,000, possibly more, was spent by these firms only to find out the market didn’t want their business in that form, at that time.
There is a shadow market with overseas listings, and mini-bonds, both of which Mr Bond has commented on before and concluded that some, perhaps many, are the ultimate leap of faith, or a gift from Spectre to unsuspecting investors.
So, where does this leave the retail investor who is still seeking yield in a prolonged period of historically low interest rates? Basically, nowhere...... ORB is rather like an exclusive gentleman’s club where one black ball stops a prospective membership application, unfortunately it appears to be blackballing itself out of existence.
Are there options for those seeking yield? Well there
are fixed income ETFs, and funds, both subjects for other writers to opine on. There is still NS&I, even ORB’s secondary market has some ‘fallen angels’ such as Eros, and Enquest for those fancying a flutter.
Or,is the bond bull market really over? The end of the bond bull market has been called before.
DIY Investor Magazine | Mar 2018 40