Tesco launches second inflation linked bond

TESCO Bank yesterday launched a follow-up to its sell-out retail bond, offering investors a return of retail price inflation (RPI) plus one per cent over the next eight years.

The inflation-linked bond will pay interest twice a year, with the full amount repaid at maturity even if RPI has fallen.

Tesco’s latest issue comes a week after the Post Office withdrew the third round of its own inflation-linked bond, putting it down to extremely high demand from investors.

Savers can put a minimum of £2,000 into the scheme, through a stockbroker or wealth manager, and can enhance the potential returns by wrapping the bond in a tax-free Isa investment.

Earlier this year Tesco’s first retail bond outperformed the group’s expectations, selling £125m – well above the £50m to £100m expected.

“Our first retail bond was very successful, exceeding all expectations. It attracted interest from a broad customer base and there was unfulfilled demand when the book was closed. The issue of our second bond, in an inflation-linked format, offers a further opportunity to investors,” said chief executive Benny Higgins.