Bonds
Effectively loans made by governments or corporations to raise capital or fund spending. They are issued for a specified redemption value at a fixed date in the future and provide the holder with regular interest payments until that time. The value of a bond will generally depend upon the outlook for inflation and interest rates, as well as the underlying security of the issuer. Bonds issued by the UK Government are generally regarded as very low risk and so are often known as gilt edged. Bonds issued by corporations may be less secure and so the issuer may have to pay a higher rate of interest to attract an investor’s capital.