What happens to bond prices if interest rates rise, and the latest Co-Op news.

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If interest rates rise, what will typically happen to bond prices? That was a question posed to 30,000 US adults according to a report in the FT today. I would hope readers of this blog know the answer because it is quite important now that QE might be tapering off and interest rates rising. Only 28% got the answer right, which is of course that bond prices will fall.

People buy bonds in the belief that they are “safer” than equities. It is often recommended by IFAs, and other financial advisors, that the nearer you get to retirement age the more bonds you should have in your portfolio. But bond prices can be as volatile as equities. The only aspect that is more secure about bonds is that the income is more guaranteed and generally fixed (so long as you hold them to maturity).

Now the holders of Co-Operative Bank…

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