What should you expect if you invest in bonds?

In this, the third of our special two-page sections on the mechanics of investing, MoneyWeek looks at the benefits and drawbacks of bonds...

What are government bonds?

Government bonds are simply IOUs issued by a government to raise money to cover expenditure that isn't covered by their tax revenues. As such, they represent a promise to pay the holder a set level of interest (known as the coupon) during the lifetime of the bond and to repay the money in full on a set date. In the UK, government bonds are called gilts (short for gilt-edged securities) and in the US, they're known as Treasuries (because they are issued by the US Treasury).

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MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.