HBOS bonds look tempting.

Investors Chronicle - magazine and web content, December, 2007

BOND OF THE WEEK: Bank's short-term debt looks attractive in the current environment.. Mark Glowrey

The London inter bank offered rate, or Libor, is an average of the rate at which banks will lend money to each other for a specified term. The generally accepted benchmark is three-month Libor, and this is the rate that we watch to take the temperature of the money markets.

At the time of writing, the Bank of Englands MPC has just cut base rates by a quarter point cut to 5.50%. All things being equal, one might expect to see this reflected in Libor rates, but banks remain unwilling to lend out money (particularly over the year end) and interbank rates have been creeping higher over the last few weeks of November (see chart, below).

At a price of 97.875, the yield to maturity is a healthy 6.6%, arguably not bad for the senior debt of a double "A" rated bank.

Buy