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Tuesday, 11 August 2009

Issuing debt in the doldrums

A big bonjour to our seasonally increased readership in the south of France, particularly those in Provence who currently make up 5% of page hits at the moment. Not joining you at the moment is the bond issuance team at Barclays who have just issued their second long dated deal in the last 10 days.

August is usually a quiet month for bond issuance as Europeans in particular take off most of the month, which is why it might seem a litle odd that Barclays (LON:BARC) have followed up last week’s €2bn ($2.8bn) 10-year senior unsecured deal with yesterday’s £750m of 12-year senior issue. On the other hand there was no shortage of demand for long dated sterling bank paper.

But this should be no surprise when we remember that more than one third of Barclays' interim profits announced last week came from the early redemption of long dated debt. Having cashed in the maket discount on their outstanding low coupon debt by buying it back, Barclays are now stocking up on higher coupon long term debt that will reverse those gains over the next ten years.

In the long term it won't make the shareholders any richer, but it made the directors look good and fooled the market last week.

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