National Grid's bond pulls in cash

National Grid's sale of inflation-linked bonds to private investors closed today after it attracted at least twice the amount of money that had been predicted.

The innovative bond, which offers 1.25% over the retail price index during its 10-year life, is the first major attempt by a corporate giant to tap into the private-investor market for many years.

The bond offer drew in £260 million in just over two weeks, well ahead of the £50 million to £120 million target most people had expected it to raise.

Malcolm Cooper, global tax and treasury director, said: "This has clearly exceeded our expectations and we are extremely pleased about the total amount raised. This shows that there is demand for inflation linked products from a business such as National Grid."

National Grid's is the first inflation-linked bond to be traded on the London Stock Exchange's Order Book for Retail Bonds. It is also the largest single amount raised through that market.

Inflation-linked bonds have attractions for private investors and companies. Investors are guaranteed a far better return than they would get in any kind of savings accounts while companies can raise finance at cheaper rates than they might have to pay in other markets.

The only real equivalent for savers is when National Savings & Investments periodically offers index-linked bonds. The latest one was withdrawn last month after the state savings scheme said it had attracted more than 500,000 applications. That bond offered RPI plus 0.5%.