What are Bonds and Gilts?

A bond is a loan. If a borrower wants to borrow money one of the ways to do it is to issue bonds. With a bond an investor lends money in return for a series of interest payments and, usually, the promise to have the loan repaid on a fixed date.

At West Capital Markets we guide our clients through investing in Ghana government bonds (gilts), International government bonds, bonds issued by European Investment Banks (EIB) and Blue Chip Corporate bonds issued by individual companies.

How do they work?

The main feature that distinguishes a bond from any other loan is that a bond is tradeable. Investors can buy and sell bonds without the need to refer to the original borrower. Over the entire life of the bond the holder receives interest, which is known as the coupon. The borrower also makes a promise to repay the loan (the principal) on the maturity date.

Government Bonds and Gilts

These are the lowest risk bonds, with money invested in governments, and other very secure financial institutes. The interest rate paid out is usually quite small, however there is little risk to your capital. The funds tend to do badly when interest rates are rising, as the interest rate on the bonds becomes less competative compared to high street savings accounts. On the flip side they tend to do very well when interest rates are falling.

Corporate Bonds 

West Capital Markets will always strive to invest your money in good quality corporations where there is little chance of bankruptcy. They offer slightly more attractive rates than the government bonds.

High Income Investment Bonds

West capital Markets also invest in bonds that pay a higher rate of interest, and often have very attractive looking yield rates (the average interest rate of all the bonds held).  These bonds are less sensitive to changes in the base rate of interest, as they always tend to significantly higher rates of interest than high street savings acocunts. They are more dependant on the default rate (which is the number of companies going bankrupt) which depends more on the state of the economy as a whole.