Contact Energy will set the interest rate for its latest bond offer this week but based on the latest swap rates it could be better to keep your money in the bank.

The $100 million 'green bond' is for five years with a maturity date of August 15 2024.

Its interest rate will be set on Thursday using a base rate plus a margin of between 1.45 per cent and 1.55 per cent per annum.

The base rate is based on the mid-market rate for swap rate of the term which is five years.


Based on today's rates the bond would pay interest somewhere in the range of 3.57 per cent to 3.67 per cent.

That would put it well below what investors could get by investing in a term deposit at a bank or finance company.

Latest rates show Rabodirect is offering 4 per cent for a five year lock in and it has an 'A' credit rating as opposed to Contact's BBB rating meaning it has a lower default rate.

Even investors with UDC which has a comparable BBB rating are being offered 3.8 per cent in interest.

There are some advantages in buying a listed bond in that it can be sold before the maturity date and it offers diversity to those investors who may already have some money tied up at the bank.

Contact is not the only power company which has been looking to raise capital with Trustpower last week offering a 10 year bond at 3.97 per cent which raised $100 million.

The Trustpower bond matures on February 22, 2029 and is set to have an interest rate re-set at the half-way point on February 22, 2024.

Investors will be hoping to see a pick up in interest rates by then - although the way things are going it could be either up or down.