Bonds

A bond is a type of IOU issued by a government, local authority or company to raise money. If, for example, a company wants to borrow money for ten years at a time when investors expect a 5% yield, it must offer a £5-a-year interest for every £100 until the bond matures (this payment is known as the coupon).

However, expected yields are constantly changing. If interest rates rise to 10%, a new investor won’t be willing to pay £100 for an annual return of £5 when he can get £10 elsewhere. He will expect a minimum 10% on his initial outlay, so the price of the bond will have to fall to £50 to reflect that. So, at a time when interest rates are going up, bond investors are seeing the value of their asset drop. On the other hand, if interest rates fall, a bond’s price will rise.

• See Tim Bennett’s video tutorial: Watch this video before you buy a retail bond.

Paul Hodges: house prices could fall 50% in 'Great Unwinding'

Merryn Somerset Webb interviews Paul Hodges about deflation, the global economy's 'Great Unwinding', and how Britain's house prices could halve.


Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.


29 January 1886: Karl Benz patents the motor car

On this day in 1886 Karl Benz patented his Benz Patent-Motorwagen, with a new and revolutionary power source – the internal combustion engine.