Graham Bentley: What role can bonds play for investors today?

People with excess money can lend it to people with a shortage of it. The interest rate charged is the compensation for the loss of use of the money. If you were lending me money, how would you set the interest rate? An interest rate is made up of four ingredients. The first is the risk-free rate - compensation for lending money with a virtual guarantee of getting your money back over the term you agreed. In the UK, the relevant Gilt might be your measure - currently the five-year yield is 0.92% By lending me money for five years, of course, you cannot spend it. You need to be compens...