§ Secondly, there are the big financial intermediaries through which much personal saving is channelled. I refer to the life insurance companies, and the pension and provident funds. These bodies naturally look to the gilt-edged market as an important outlet for their funds. Two new stocks will be issued.
§ The first will be a convertible stock on terms which I believe will have considerable appeal for institutional investors. The issue will be of £1,000 million with a coupon of 9 per cent. and an issue price of 99½. The initial stock will mature in 1980; but at that point, lenders will 256 have the option of converting the initial stock into a new 9 per cent. stock maturing in the year 2000, and of accepting £110 of that new stock for every £100 of the initial stock. The yield to maturity over the full 27 years will be about 9.6 per cent.; but investors will, of course, have the option of repayment at par in 1980 if that is what they prefer.
§ Second, there will also be a further new issue to help meet the steady demand from investors for stocks of a low coupon. There is some evidence that, for this type of stock, the balance between supply and demand is now such that large purchases have a disproportionate effect on price, with an unsettling effect on the market. The position is being aggravated by the fact that two further 3 per cent. stocks mature on 1st April. There will therefore be a new issue of £400 million, maturing in September 1979, with a coupon of 3 per cent. and an issue price of 75.