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Reset rate market discounts, corporate bonds probably past peak

Discounting in the reset securities bond market and the issuance of new corporate bonds are probably past their peak as the major banks look to attract investors, according to AMP Capital Investor’s Grant Hassell.

Friday, April 16th 2010, 5:56AM

by Paul McBeth

Hassell, the investment manager's head of fixed assets, says the banks have gone back into "growth mode" as they shore up their balance sheets and build their assets. That has taken the gloss of the reset securities bond market, which was heavily discounted at the low end of the yield curve last year, and Hassell says the securities are now around "fair value" as cash flows free up.

"An awful lot of people have switched out of them, and they're almost as expensive as fixed rates," he told

An increase in aggression from the banks will probably dampen demand for new corporate bonds for as long as six to 12 months, Hassell said.

"The banks are back into growth mode and that will take away new opportunities for retail investors," he said. "High coupons are not going to be there."

Last year, corporates issued bonds to retail and institutional investors as a way to raise cash as bank funding dried up, and were offering attractive yields in a low-interest rate environment.


Paul is a staff writer for Good Returns based in Wellington.

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