Bond markets

[Condi]

Does anyone here invest in bond markets or hold bonds rather than stocks and shares? Ive never been a great stock picker, and dont have time to do it, and funds have always been a bit hit or miss. Bonds seem to offer a more stable return without the highs and lows, but still can return 5%+ a year, which tbh would do me nicely.

Anyone have any opinions or thoughts on them?

[Condi]

DibblyDobbler said:

Thanks very much for the reply

So simplistically - if a company borrows £100 and agrees to repay £105 a few years later that arrangement (ie the bond) is not going to change (assuming there's not a default) but the £105 is worth less if interest rates go up so the value of the fund which holds the bond will fall?

So am I daft to hold bonds at the moment or is it still a sensible part of a portfolio?

Cheers.

If you have a bond paying £105 in today's money, at 0% interest rate/inflation (which are generally linked in terms of asset pricing and alternative investments) then 105 in 2 years time is the same as 105 today - and a 5% return.

However, if interest rates and inflation are higher, then the £105 in today's money will be worth comparatively less in 2 years time, maybe only £101 in real terms? So only a 1% return.


At the moment interest rates dont show much sign of rising, even with the lower £ and increased inflation that will bring. It would be a daft thing for the treasury to do at the moment. Other parts of the world dont look so rosy either.

[Condi]

DibblyDobbler said:

Thanks again. That also makes me think I'll sit tight for a while with my bond funds.

The article which rattled me slightly is here - one choice quote is 'The Bank has developed new “market maker of last resort” powers in anticipation of a nasty bond rout so it can mop up billions of pounds of assets in the absence of real buyers.' Any thoughts on that?

Anything could do pop at the moment. Cash is the only safe investment but with 0 return on savings there are a lot of people and companies looking for a return, and so (IMO) most assets are, if not over-valued, then on unstable foundations. I dont think that there is any bigger risk of bond routs than there is of the stock market correcting down.