Investors to continue support for bond buybacks

"For an investor there are certain attractions," said Robin Creswell, managing principal at Payden & Rygel . "It creates liquidity in a way that's convenient for us, to sell bonds out of our longer-dated accounts and buy others."

He sees this additional liquidity as particularly helpful in the run-up to year-end as market activity reduces, suggesting support for buybacks will continue.

In the last few weeks there has been a raft of offers from consumer names such as Marks & Spencer , Danone , Tate & Lyle and BAT to buy back short-dated bonds with a view to issuing longer-dated bonds to reduce refinancing risk.

Dutch Chemical company Azko Nobel announced a similar liability management exercise on Wednesday.

It is a trend that is likely to continue as treasurers seek to cut their reliance on bank funding, with analysts at BNP Paribas suggesting other buyback candidates may include Kingfisher , Heineken and Imperial Tobacco .

European corporates have issued record amounts of bonds this year at over 284 billion euros (258.8 billion pounds) -- a 50 pct increase on the previous high recorded in 2001.

"It's a good environment for almost any company whatever their credit quality to come to the market," said Creswell.

In some cases, the lower the credit quality, the more attractive it might be: "With a higher credit quality company, there is more liquidity and the bid/offer spreads are less."

Companies making a tender offer pay a premium to take bonds out of the market, but this is not necessarily the big draw, say investors.