Bonds involve investors loaning their money to an organisation (ie a government or a company), and receiving fixed interest payments over a set amount of time. They are traditionally seen as a safe investment, and a key part of a diversified portfolio.
Bonds have always been a popular investment for British investors, for while their value can fluctuate according to factors such as interest rates and inflation, they provide investors with a regular income.
At MoneyWeek, we'll keep you up to date with what's going on in the bond markets – and whether or not it's a good time to buy them.
It's easy to become confused about bonds – the term covers a wide range of financial products. Here, Ed Bowsher explains the main types of bond.
In this video, Ed takes a look at UK government bonds – how they work, why they are important, and whether you should invest in them.
MoneyWeek bond watch
Government bond yields around the world started climbing again in Autumn 2010. This showed investors getting more jittery about a toxic mix of soaring state borrowings and rising inflation, and so demanding bigger returns as compensation.
Global ten-year sovereign bond yields
America's ten-year bond yield is arguably the world's most important market indicator: it sets the cost of global long-term borrowing. As with other government bond yields, it falls (prices rise) when economic growth and inflation decline, because the fixed income stream paid by sovereign debt becomes more valuable. Quantitative easing (central bank bond-buying) has lowered yields further.
But in mid-2012, yields bottomed, except in Japan where they've since followed suit. Economic growth is now reappearing, while inflation and state debt concerns are still present. A global bear market in bonds now looks a real possibility, led by US Treasuries. That would make borrowing more expensive everywhere.
Eurozone ten-year sovereign bond yields
On the edge of the eurozone, rising default fears have been sending peripheral countries' sovereign debt yields soaring. The rough line in the sand so far is 7% - when yields breach that, it looks like the point of no return.
How will this play out? Watch this page to keep a close eye on those yields - they're a great early warning indicator of trouble ahead.
Spanish and Italian three-year sovereign bond yields
Here's the chart of Spanish and Italian three-year bonds. As investors' fears about these countries' finances grew, yields spiked up sharply.
Bonds: the MoneyWeek view
April 2015: An asset to avoid Government debt is so overvalued that negative yields have become common all over Europe. In the corporate-debt market, yields are still positive, but even these rates have fallen fast. Stay away.
• See our view on all the major asset classes here.
When interest rates finally start to rise, defaults are likely to pick up, with serious consequences for many investors in junk bonds.
In their desperate efforts to find yields, investors have been gripped by bond mania. The big question, asks John Stepek, is when does it all end?
Declining liquidity in US Treasuries – the global ‘safe-haven’ asset – could have unpredictable consequences.
Switzerland has become the first country to sell ten-year government bonds with a negative interest rate.
There’s talk that central banks will loosen up what banks need to hold as reserves, says Bengt Saelensminde. That could send stockmarkets soaring.
Investors are clamouring to pay for the privilege of lending to the Swiss government. But as John Stepek explains, things could be about to get a whole lot crazier.
Asset allocation is at least as important as individual share selection. So where should you be putting your money? Here’s April’s take on the major asset classes.
Two big hitters at the Bank of England disagree on where interest rates will head next. Who should you believe? Bengt Saelensminde explains.
Risk in the eurozone will be cast in a whole new light if Greece is allowed to ditch the euro. John Stepek explains why that could be disastrous.
Tighter rules governing banks’ bond holdings and debt-market activities could cause the next credit crunch.
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