Sharp investors can take advantage of the market conditions

IT WAS interesting to read the minutes of the meeting of the Monetary Policy Committee that sanctioned the quarter point cut in interest rates. The voting was seven to two in favour. I cannot help wondering whether the committee's eyes were really focused on the other side of the Atlantic.

If you believe some newspapers, our much-revered Governor of the Bank of England has been somewhat critical of the recent cut in interest rates stimulated by Washington. Perhaps we should believe he really did say Mr Greenspan's decisions amounted to "a whiff of panic", but this phrase does not sound very Georgesque to me. Whatever the truth of the situation, markets have been blown hither and thither.

One advantage of this is the opportunity for sharp investors to take advantage of market conditions. They have even encouraged me to make my first purchase in my, thus far, cash-rich pension fund. A Euro Sterling loan from HMV Media has been tucked away for retirement, offering a gross yield to redemption of over 14 per cent. Crazy, in my view, but clearly reflecting the fact that the covenant, however attractive it seems, is nonetheless not as good as a Government. Even now my fund is seeking out more bargains.

What was particularly interesting about this particular stock is that it was mentioned by the manager of the new M&G Bond Fund to someone I know. It sounded as though they considered it a steal too. You have to understand the bizarre conditions that exist to realise how these opportunities can arise.

The unwinding of Long-Term Capital Management's bond position, for example, has led to a mass of sterling-denominated issues. It would seem the last few weeks have seen close to pounds 7bn worth of bonds issued.

This is because the now rescued hedge fund had built up a massive position in the risk premium between UK Government bonds and Libor - the interest rate charged by banks when they lend to each other. LTCM was short, which amounts to selling stocks you do not own. Unwinding this position has allowed the cheap issue of these bonds.

I do not feel private investors, unless very sophisticated, should consider individual stocks like this, but it makes you realise that some of the bond fund managers must be having a marvellous time. Backing one or other of the major houses may be a good pastime for those who still feel that markets are just a little bit too scary to back for anything other than the very short term.

Brian Tora is chairman of the Greig Middleton strategy committee