Buying 100-year bonds looks like a gilt-edged way to lose money
Buying 100-year bonds from the British Government when interest rates are at historic lows looks like a gilt-edged way to lose money, as dismal returns on War Loan stock demonstrate.
Gilts – or bonds issued by the British Government – which pay a fixed rate of interest may appear to be as safe as the Bank of England. But they are vulnerable to any increase in inflation in the period before they are redeemed because this will reduce the real value or purchasing power of both the coupon or income they pay and their maturity value on redemption.
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