Of Bonds and Bertie

You may feel the bond market is both baffling and boring; I do.

I was told by a fund manager many years ago the trick is to buy the right sort of bonds; at the time he had wisely switched from corporate bonds to government bonds. I felt Index-Linked UK government bonds were a safe choice. Accordingly a few years ago I asked the boy broker to choose something for me. He picked Treasury 2.5% Index-Linked maturing in July 2024. They cost £7,494 and today are worth £7,268; a loss of 3% which is acceptable in these turbulent times. The Telegraph, I have finally realised it’s no longer “Daily”, in its Questor column has a fantasy “Wealth Preserver” portfolio. In May 2021 they bought Treasury 0.125% Index-Linked maturing in 2036. Sounds a safe choice? Wrong – these longer-dated bonds have fallen by 35% – not the right sort of bond.

Corporation Tax is expected to rise by 6% next year to 25%. This is a tax paid by companies so need not concern us. Wrong again. It will impact on company profits and therefore dividends. Furthermore as shareholders we will have involuntarily paid an extra 6%. Will there be a commensurate reduction in the tax we pay on dividend income or is this another stealth tax?

And now for some good news. Our car insurance has dropped by 28% to £865. Admiral knows having a front seat passenger reduces the chances of having an accident – four eyes are better than two. So Bertie sits up front. Meanwhile the guest annex of Number 56 ( aka Premier Inn) is making good progress.