Places for People has launched a new inflation-linked retail bond following the success of its fixed rate offering last year.

The housing association’s ten-year bond will pay an annual interest rate of 1 per cent on top of the change in the retail price index (RPI), which is currently at 5.2 per cent.

If RPI falls over the ten-year period, investors will still be repaid the par value of the bond.

The minimum investment is £2,000, rising in multiples of £100 thereafter, and investors can buy the bonds through stockbrokers and wealth managers.

The association is aiming to raise between £50 million and £75 million after its fixed rate 5 per cent retail bond raised £140 million in May 2011.

Chris Jones, treasurer of Places for People, declared the firm was ‘excited’ about the retail bond market as ‘a new source of funding and a diversificationary strategy’, and that it had returned to the market after the performance of last summer’s bond.

The offer is expected to close on 25 January 2012, but may close earlier depending on the demand, and the bonds will be tradable on the London Stock Exchange’s order book for retail bonds (ORB) from 31 January this year.

Adrian Bell, head of debt advice and origination at Evolution Securities, the lead manager on the issue, claimed investors were flocking to inflation-linked bonds as a ‘flight to safety’.

He explained, ‘Investors are looking to inflation-linked bonds because the markets are extremely volatile, and this bond gives them a change to protect their capital and earn a small real return on it.

‘The demand in the secondary market at the moment is definitely stronger for inflation-linked deals than fixed rate deals.’

Bell added, ‘We will definitely see more issuances on the retail bond market this year as a wider range of borrowers choose to make use of it. We expect to have another couple of deals in this quarter, possibly one fixed rate and one index-linked.’

Places for People, which has a debt rating of Aa3, is one of the largest housing associations in the UK, managing over 62,000 homes with assets in excess of £2.9 billion.