Investors warn against high NIPs punishing long term support

By Nigel Owen, Victor Jimenez
09 Jan 2019

At first look, a high new issue premium makes a corporate bond deal look cheap for investors. However, the negative effect that premium can have on an issuer’s outstanding bonds can prove to outweigh the cheapness of the new deal for an issuer’s long term backers.

“In simplistic terms, secondary spreads reflect the credit risk of an issuer and the new issue premium reflects the risk in the market at the time of doing the deal,” said a credit fund manager at a UK asset manager. “But if the new issue premium is seen ...

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