Corporate bond launch [Guardian]

The PIC has held corporate bonds in our portfolio for a couple of years. Now the London Stock Exchange is making it even easier to purchase them.

"Savers looking for a better return on their money will, for the first time, be able to invest in individual corporate bonds issued by major companies such as Tesco and BT, following today's launch of a trading service for private investors.

The London Stock Exchange (LSE) has unveiled a "retail bond market" allowing private investors with modest sums to buy and sell bonds paying about 5%-8%.

Corporate bonds are a form of debt issued by companies to raise money, which pay a fixed rate of interest for a set period. They are generally considered less risky than shares, but more so than putting your cash in a savings account. The main risk for the buyer of an individual corporate bond is that the issuing company might get into financial difficulty or even go bust.

Traditionally, this type of investment has only really been an option for big institutional investors because the minimum amount needed to trade was typically £50,000 or more.

But now, at a time when savings rates are at an all-time low and many people are nervous about the stockmarket, individual investors with as little as £1,000 to invest – and, in one case, just £100 – will be able to access the corporate bond market.

Initially, 10 bonds are available for trading issued by companies including Tesco, BT, National Grid, GlaxoSmithKline, Morgan Stanley, GE Capital and Enterprise Inns. There is also a bond issued by Royal Bank of Scotland specifically for the new service, which matures in February 2020 and pays 5.1%. This has a minimum investment of £100.

Typically, investors will be able to trade the bonds in £1,000 chunks in the same way they would buy and sell shares.

A spokesman for the LSE said the bond market had been launched "in response to strong private investor demand for greater access to fixed income".

Many savings accounts are currently offering very poor returns. David Buik at City broker BGC Partners said: "3% is about as good as the individual will get, whereas with a company such as Tesco the interest on a seven-year bond would be closer to 5%."

But he added: "There is obviously a credit risk which investors have to take into account. Potential investors also need to be mindful of the fact that we may well be at the end of a low interest rate cycle, so they need to be comfortable in their own mind that, say, 5% is a decent rate and that they are not too worried about holding on to bonds for a lengthy period of time."

Speaking at the launch, Paul Killik, senior partner at stockbroker Killik and Co, said there had been growing demand from its private investor customers to access the corporate bond market, but until now a centralised, transparent order book for trading in "individual retail friendly-sized bonds" had not existed."