When you buy a bond, you are actually loaning your money to the organization that issued the bond. Optionality: The fourth fixed income strategy for reducing the interest rate risk in a bond portfolio relies upon the existence of embedded options within a bond indenture, and specifically bonds having embedded call options (a structure that is especially common in the municipal bond market).
If you are allowed to make further deposits after opening, you will only be able to do so for a limited amount of time or while the bond is on offer to new customers (sometimes referred to as ‘while the issue is open', which means that once it is withdrawn from sale, you cannot add to your savings pot).
Investments with lower risk level (conservative) such as bonds, debentures, and other debt instruments tend to provide lower returns and higher risk level (risk tolerant) such as equities and derivatives will potentially have higher returns; risk versus reward.
Although our Maturity Britannia Fixed Rate Bonds are limited issue and can be withdrawn without notice, we promise to honour the rates contained within your maturity pack as long as we receive your reinvestment instructions before your maturity date.
Yet, if you want to get the best rates (around 5 percent) you've got to be willing to leave your money there for five years - which is as big ask for many savers who are anticipating the possibility that within that time their interest rates will lose their competitive edge.
Springall explained one reason for the withdrawal of bonds was because providers often released top rates to attract attention and then, when they became inundated with deposits, they would cut their rate to ‘ward off the hoard' or simply cut the offer entirely.
Alternatively, if you're comfortable with a small element of risk to the 'interest' you get, the very top payer is the sharia account from BLME at 1.8%. This is an 'expected profit rate' rather than guaranteed interest, though the bank has always met its expected rates in the past.
You can get a better rate if you lock in for five years, but in the current climate of uncertainty the risk is that you lock your money away best fixed rate bonds and rates go up. Of course, though, if you think interest rates will go down, then this is a good way to lock in today's rates for longer.