ICR041: High yield bonds & rising interest rates
This week in episode 41 of the Informed Choice Podcast, Martin talks to a fund manager about what rising interest rates mean for high yield bonds, explains why building societies are better than banks, and tells you what it takes to retire ten years early.
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In the personal finance and investing new roundup this week:
-Price inflation in the UK has fallen back to zero.
-Savers with a National Savings & Investments Direct cash ISA will see their interest rate cut from 16th November.
-House prices in the UK are still on the rise, but are now rising fastest in the East of England.
-At least half of all UK banknotes in circulation are held overseas or used in the black market, according to the Bank of England.
-The OECD has cut its economic growth forecasts for 2015 and 2016, warning about a dramatic slowdown in Brazil and a global outlook clouded by uncertainty over China.
Interview
Martin had a chat with Michael Scott, manager of the Schroder Monthly High Income Fund.
We are often asked by clients about the impact of rising interest rates on the fixed interest funds they hold within their pension or investment portfolios.
Mike’s area of fund management is high yield bonds, so we wanted to find out from him what rising interest rates could mean for bonds at the higher yield end of the credit spectrum.
Main topics
What impact would a gradual interest rate rise have on the housing market?
Speaking at an event for mortgage brokers in London this week, Nationwide’s senior economist Stefano Silvestrin has warned that even a gradual rate rise will have an immediate impact on the housing market.
He outlined a future in which interest rates rise gradually over the next two or three years to reach just over 2%. So not a dramatic or fast rise, pretty much what we’re expecting to see from the Bank of England.
What’s better? A building society or a bank?
Research by Cass Business School appears to have found the answer, saying that Building Societies have consistently offered customers a “better deal” than banks.
Their report, called ‘An analysis of the relative performance of UK banks and building societies’, found that building societies had consistently outperformed banks across a number of financial indicators since 2000.
What would it take for you to be able to afford to retire ten years earlier than planned?
Martin mentioned last week on the podcast that he was having a particularly busy week, and one reason for that was a couple of press features he had been helping journalists with. One of these was published in the Sunday Telegraph at the weekend.
Useful links
Here are links to everything else Martin mentioned in episode 41 of the Informed Choice Podcast:
–Institute of Financial Planning
–BrightTALK Multi-Asset Summit presentation
–Informed Choice Paraplanner vacancy
–Cranleigh in Bloom – Silver Awards for Informed Choice
–BBC Radio 4 Money Box Live with Nick Bamford
–Award-winning Meaningful Money Podcast
–Blab.im Financial Podcasting Live with Pete Matthew & Roger Edwards
–Do the sums and retire 10 years early (Sunday Telegraph article)
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