Thousands of New Zealand investors got some good news yesterday when a listed bond announced it would resume interest payments.
The Fidelity Capital Guaranteed Bond was forced to suspend payments in January because of fallout from the US credit crisis.
The bond, which mainly invests in options over
US government bonds, failed to meet payments due on January 15 because poor performance of the investment fund meant there was not enough money to cover the interest.
Yesterday the bond's issuer, Auckland insurance and investment company Fidelity Life, said it would be able to meet interest payments due on July 15 and the investment had made up sufficient ground to ensure it could also pay the missed interest instalment as well as interest on top.
Fidelity Life chairman Ian Braddock said the turnaround in performance came down to the underlying nature of the investment and adjustments made by investment manager Tyndall.
"The investment fund writes options on US government stock and has enjoyed very favourable conditions in recent months. Despite continued interest rate volatility, the fund manager has successfully managed the risks and increased revenue."
The 6.3 year bond listed in April last year with $75 million. By December Tyndall had only managed to up its value to $76 million. But since then it had increased to $86 million.
However, Braddock said there were no guarantees that the bond's interest payments could not be suspended again because it depended on the stability of overseas markets.
Investors' capital remains guaranteed by Westpac and there would be $3 million left as a buffer for the future.
