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Demand grows for gilt-backed products

Demand for gilt-backed structured products will grow but providers will have a challenge pricing them in the low-interest-rate environment, says AWD Chase de Vere senior manager Jason Walker.

He says there has been a wave of new gilt-backed structured products as investors have become more aware of counter-party risk. He says: “People do not feel that secure with banks or rating agencies. It is hard to quantify what AA-rated really means, whereas gilts are a security backed by a very secure institution. These products will become more popular this year.”

Aviva plans to launch a structured product within a Ucits fund structure and intends to minimise counterparty risk through collateral arrangements with Government bonds.

Morgan Stanley is offering another tranche of its three-year FTSE defensive AAA gilt-backed growth plan and cut its pre-defined annual return to 7.25 per cent from 9 per cent. This is payable as long as the index does not fall by over 10 per cent on each annual anniversary during the investment term.

Walker says it will be increasingly difficult for providers to price the derivative in these structured products until interest rates rise. He says: “The one thing going in their favour is the volatility in the markets but if that stops there really would not be any new issuances.”


Fed minutes reveal downbeat outlook

Yesterday’s publication of the minutes of the Federal Open Market Committee meeting held on March 17-18 reveals a downbeat short-term outlook for the American economy.As well as revising down its projections for real GDP growth in the second half of 2009 and 2010, most participants viewed downside risks as predominating in the short-term. The minutes […]

I am not with the Woolwich

I note that the Woolwich continues to display its disregard and utter contempt for introducers with its Canute-like insistence in pressing ahead with its ludicrously ineffective and frustrating mortgage service.

Planning now for the residence nil-rate band

Graeme Robb, senior technical manager at Prudential, writes about the residence nil-rate band and the advice opportunities it presents for you when tax year-end planning with your clients. On our Planning Matters hub, we considered a widow, Margaret, and a married couple, John and Anne, for whom the residence nil-rate band (RNRB) is influencing planning […]


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