Tempo Long Income Plan
Tempo have a little space for investors into their Long Income Plan – on the current terms of 5.15% – which is going to reduce as a headline potential level of income in March.
We are sending this note around to see if there is an interest in this ‘last day’ of the offers – based upon these terms.
The next coupon level will be lower. To explain why:
1. While news is appearing to point towards ‘soft’ Brexit the outlook for UK (and global) economic growth and inflation is also softening, meaning that the long term swap rates (i.e. expectation of the future level of interest rates) have softened (from c1.5% to 1.35%). This swap rate softening is annualised, i.e. for a 10 year product it is multiplied by 10, so it has quite a significant effect (making the product c150bps – which means 1.5% more expensive to manufacture).
2. Morgan Stanley (and other banks) credit risk has improved slightly, so their ‘funding’ levels on the zero coupon bond element are slightly lower, also making the manufacturing more expensive. The strengthening is also in the region of 15bps (for example, Credit Default Swap levels of slightly more than 90 are now slightly less than 80), which is also annualised, so also c150bps for the product.
These two factors combined mean that the product is now c.300 bps more expensive to manufacture, so that the rate of 5.15% would now be c4.6%, or even 4.5%.
So, if you are attracted by a level of income (subject to contract terms) at 5.15% with the lower risk nature of the product, you will have secured improved terms over the next issue due.
This product is an ‘advice only’ product so requires the full regulatory process to be carried out of ‘Know your Client’ leading to a conclusion of suitability, which confirms the product would be suitable to meet an investors’ needs.
As always, past performance is no guide to future performance and unit prices fall as well as rise. Financial advice is required to conclude suitability prior to investing.
If you wish to consider investing we would need to know today to gather the current headline rate. Please contact us if you are interested and we will provide you with the Brochures etc as they are no longer available on our website.
Best Price FS Team
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