Fears about financial bonds are overstated

ON BONDS

Artemis' James Foster says banks' focus on raising capital means more security for bond investors.

UK government bonds are yielding a miserly 2% – with inflation running at 4.5%.Clearly, they are a very poor investment. Hoodwinking investors to buy a five-year bond at 2%, while inflation is 4.5%, is a fantastic wheeze. Automatically, investors are losing over 2% per year for the privilege of owning UK government bonds. One day yields  will  rise to correct the anomaly.  To put this into context, apart from a brief spell in 2008, the last time inflation was at such a level was in 1992 – when five-year yields were over 9%. UK yields will rise to reflect the high inflation environment. T...