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Bonds

What are bonds?

Bonds represents a state of indebtedness, a bond is a loan issued by governments and corporations to finance particular projects such as building roads or research. These bonds can be traded by investors who will then receive the future payments - including interest known as ‘coupons’ - until the bond matures.

Bonds with a fixed interest rate are also known as ‘fixed-income securities’ because the corporation loaning the money can calculate the total sum they’ll receive if a bond is held until it matures.

During a period of high interest rate, bonds can become more lucrative as the yield on bonds increases. If the country’s central bank keeps interest rates low throughout the lifetime of the bond, then the yield isn’t likely to be high so they price of bonds is pushed higher.

 

Bond Market News from LGIM

As one of the UK’s leading investment managers, LGIM offers knowledge and experience that can bring real benefit to investors looking to understand market movements in both equities and bonds.

Find the latest bond market news with MacroMatters, from rates fluctuations and government policies.

Our Asset Allocation team includes dedicated and experienced strategists whose focus is to forecast the outlook and the stage of the market cycle for their specialist asset class, including bonds and equities. They work alongside our in-house economics team who focus on assessing the underlying macroeconomic environment. Our economists then work with our team of strategists and portfolio managers to translate their views into what this means at a portfolio level.

Strategy

Do Italian BTPs* present an opportunity or a threat?

Five months is a long time in Italian politics. Back in June, we observed that Italy was too big to fail, but also too big to bail. We were also waiting for the almost inevitable clash with the European Commission over the budget. That has now arrived and we have started trading Italian risk in the new higher range for spreads.

* (Bubbling Tensions in Politics)

November 13, 2018 3 mins