Buying 100-year bonds looks like a gilt-edged way to lose money
Gilts might look like a safe option, but they carry real risk for investors
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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Short URL: http://woodlawnpost.com/?p=42334
Posted by WoodlawnPost
on Mar 15 2012. Filed under Rates & Bonds.
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