* Glencore follows similar deals from Latam firms
* High coupons attract private bank/retail investors
* First signs of market indigestion
By Alex Chambers
LONDON, Sept 28 (Reuters) - Glencore's plans for a perpetual bond, after several similar deals last month, show investors are desperately seeking high returns, with the first signs of fear of a market bubble beginning to form.
The world's largest commodities trader met investors on Monday in London and Hong Kong for a planned dollar perpetual bond that should be priced on Wednesday.
"If you are a high quality, credit-worthy borrower then you are looking at the possibility of doing very long-dated bonds," said Ed Devlin, a fund manager at PIMCO.
Yields on longer-dated corporate bonds have plummeted as investors chase returns, giving issuers the upper hand and prompting questions of whether a bond market bubble is building.
"That is potentially true but the fundamentals are still positive for fixed-income instruments," argued Devlin.
Devlin said money is flowing into fixed-income due to demographic pressures from the retiring baby boomers who have 20-year pension liabilities, while at the same time there are only a few cheap bonds around.
September has seen a flurry of perpetual bonds, with issuers such as Mexico's PEMEX, Brazilian steelmaker CSN and compatriot petrochemical giant Braskem all closing deals.
Investors are drawn by the promise of large pay-outs. Funds run by managers like Devlin have achieved spectacular returns of late, Pimco's Euro ultra long returned 43 percent in the 12- month period ended Sept. 22, according to Lipper.
"People see low rates for a long time, the credit market has been rallying aggressively, and it's hard for investors to get a good yield," said Henrik Raber, global head of debt capital markets at Standard Chartered.
Switzerland-based Glencore's bonds are callable after five years at the issuers' option giving treasurers the flexibility to refinance if interest rates fall further, or their corporate finance requirements change.
The bookrunners on Glencore are HSBC, Standard Chartered and JP Morgan.
IS IT A BUBBLE?
With a credit rating of Baa2/BBB-, secretive and privately owned Glencore will need at least a 7 percent coupon to get a benchmark deal priced, as the market is beginning to show signs of indigestion after the recent flurry of deals.
Still, anaemic economic growth means that long-dated bond investors see their downside risks as limited, because there is little reason for interest rates to rise.
"It is hard to see a lot of upside from here. But look at the inflation and growth picture -- both look benign," said PIMCO's Devlin in London.
And Glencore is in a good position, being an issuer on the cusp of investment grade, which is able to offer coupon levels near or around 7 percent.
The 7 percent yield on the perpetual issued by CSN tallies with the Brazilian's split ratings of Ba1/BB+/BBB- with Moody's, S&P and Fitch respectively.
State-owned PEMEX, rated Baa1/BBB/BBB, got the tightest level of recent deals of 6.625 percent.
One of the key investor bases for the perpetual planned by Glencore and others are private bank and retail bank clients, often based in South East Asia, who are less demanding on pricing than institutional investors. (Additional reporting by Joel Dimmock; Editing by Erica Billingham)