78. Investors want to buy cheap, low risk bonds which remain liquid in the after market. It is the lead managers' job to balance those requirements with those of the issuer. The bonds were launched at a time when there was a great shortage of long dated Gilts and investors were keen to buy Gilt equivalent type assets. The bonds were issued on favourable terms to investors in the sense that they were made as liquid as possible within the constraints already discussed. Depending on the motivation and performance measurement of each investor, the GGBs would either have been viewed as cheap, but illiquid Gilts or expensive AAA Eurobonds, comparable with issues by EIB or KfW.
79. It seems that there were a number of investors, in particular those measured against the FTSE Actuaries Gilt Index, who felt that they could not invest at the final pricing if the GGBs were not in the index. Had they been included, the GGBs would have been cheaper compared with Gilts; but as Eurobonds they were expensive compared with their supposed peer group.
80. Were the bonds targeted at the right type of investors in order to create as much competition in the market as possible? As far as we are aware (we have seen very little written evidence and we would not expect the book runners to reveal this to us), the bonds were offered to a wide range of fixed income investors in the UK and abroad. We have also noted that it appears that some effort was made to sell the bonds into the US at issue. We believe that the lead managers may have succeeded in selling bonds to investors who previously have only bought Gilts and this compensated for the absence of a number of major Eurobond investors. The bonds were not as retail friendly as Gilts but without an expensive marketing exercise we do not think that retail investors would have bought a material number of bonds.