Investors to continue support for bond buybacks

"The amount of money you can make is small relative to the overall spread volatility in the market," said Jamie Stuttard, head of European and UK fixed income at Schroders .

Other investors argue that the value is not all in the price, but also in what they can do with the money if they can sell certain bonds.

"You might be offside against book value but it gives you the opportunity to invest the proceeds elsewhere more attractively," said Eric Holt, head of credit at Royal London Asset Management (RLAM).

Neither do investors want to be left holding the rump end of an issue that becomes illiquid and pulls out of the benchmark.

"If it's a sub-one year bond you would probably be happy enough to let that run until maturity, but a 2, 3 or 4 year issue can become illiquid pretty quickly," said Robin Green, head of credit trading at JP Morgan Asset Management .

Investors said they were unlikely to try to position for potential buybacks, because of the difficulty of picking the right name and the part of the curve that the company will want to take out.

Sajiv Vaid, a fund manager at RLAM, pointed out that there was not much value in this anyway. "If you tried to do that, you'd be buying very short-dated bonds with maybe an upside of 20 basis points ... and 20 basis points won't make your year."

He added that the premium to buy back bonds may reduce as tender offers become more common but to go longer investors may start to demand a greater premium.

(Editing by David Cowell)