Finance forum: Gov. bonds and Spread

Government bonds are debt securities that nation states issue in financial markets in order to finance some of their activities and services. An interest rate is applied to the securities and depends on the term of the loan, but also on the economic stability of the country that issues it. The “spread” is the difference in returns between the interest rates on government bonds from different countries.

Good news for savers! Interest rates reach 1.81% for four-year lock-up periods

Posted on 07.09.2021

After inflation retreated slightly in July, concerns about the Bank of England (BoE) raising the basic rate subsided. But for savers, that meant interest rates remained low, with inflation eating out their returns. Still, if you can lock up your money for one year or more, you could find some new higher interest deals.  One deal, announced last week, is DF Capital’s one-year bond offering. It yields 1.45% if you have a minimum of £1,000. That compares with the best-paying bond ...

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UK index-linked gilts sector outperforms in July, gaining 6.38%

Posted on 11.08.2021

The Investment Association compiles data on fund performance and divides them into 30 categories. The fund sectors act as a benchmark to assess monthly fund performance. The IA has 52 defined sectors with more than 4,100 funds and ETFs tracked.  Data for July 2021 showed that UK Index-linked Gilts outperformed all other fund sectors. The fund sector recorded 6.38% returns. The next best performing sector was the European Smaller Companies fund pool with returns of 3.95%.  It’s ...

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UK gilts: 6 questions answered

Posted on 02.07.2021

The UK has never defaulted on bond payments, so investors should be reassured when holding UK debt instruments that their money is safe. One debt instrument is a gilt. What are they and how to invest in them, are only two of the six questions this article answers. 1. What are UK gilts? They’re government bonds issued by the Treasury. You can trade UK gilts since they’re listed on the London Stock Exchange (LSE). Holding a gilt, you’re lending the government money in return f ...

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Why are investors buying bonds when yields are low?

Posted on 18.06.2021

In the first four months of 2021, the US Treasury issued $1.73 trillion in long-term bonds. The Fed bought $320 billion, while $1.40 trillion remained open for investor interest. Some investors have been buying these bonds and selling equities.  The negative real yield on bonds makes this counterintuitive. What is driving investors in this direction? According to John Authers, automatic asset allocation rules are to blame. Regulators also have a say in it. Investor trading According to ...

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China’s bond market attracts foreign investment

Posted on 24.05.2021

Foreign investments in China’s bond market are expected to reach 15% within the next three to five years compared to the 3.44% share recorded in April, according to Jason Pang, portfolio manager of the JPMorgan China Bond Opportunities Fund. Increased interest was further evident in April when foreign investors were net buyers of $9 billion in Chinese bonds as opposed to being net sellers a month earlier, according to data provided by Natixis. Citi also expects an additional $300 billion t ...

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British government announces £120 million compensation scheme for LCF bondholders

Posted on 27.04.2021

The British government has announced a new compensation scheme for investors who lost money in the London Capital and Finance (LCF) scheme. The compensation scheme will help investors recoup their funds, up to a maximum of 68,000 pounds, as reported by Jon Yarker of MoneyMarketing.  Why did investors lose money? LCF was a firm that was authorized by the FCA to issue mini-bonds to investors. These mini-bonds themselves, however, were non-transferable and unregulated. The firm used the mone ...

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Global funds cut China debt holdings

Posted on 09.04.2021

Amid plans for more debt sales and yield premium over treasuries narrowing, global institutions reduced their holdings of Chinese government bonds during March 2021. At the end of the month, foreign investors were left with 312 billion dollars worth of Chinese government bonds, down about 2.5 billion dollars from the amount held in February. This reduction estimate was calculated by Bloomberg using Chinabond data. Chinese bonds were in high demand because of their reputation as a haven while th ...

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Bank of England Aligns with US Fed Over Bond Market Rout

Posted on 02.03.2021

Bank of England policymakers have brushed aside any concerns about market troubles and equated the rise in borrowing costs to confidence in the quick economic recovery. Both the US and the UK have had considerable success in getting their population vaccinated. This has increased confidence among investors who in turn pushed the 10-year US Treasury to its highest level since this time last year. Effect on the UK market British bonds were hit hard by the pandemic last year. But at the moment, y ...

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