How do bonds work?

[johnk]

I'm looking at the Tesco 5% bond, How do these things work?

[twix123]

These are investments bought through a Stockbroker, therefore will be subject to commission on buying or selling. With the base rate being so low, these bonds will be trading above their nominal value and, if as expected, interest rates start to rise, the trading price of the bonds is likely to fall in tandem, leading to a capital loss if sold or at redemption. These are also not covered by the Financial Services Compensation Scheme.

http://www.guardian.c...onds-retail-investors

[johnk]

Think I'll give it a miss. redemption is in 2018 so I expect interest rates will be up by then.