Government bonds 'may be a safe place for savings'

Friday 05 February 2010

Article by Mozo

Aussies may be able to get a good return on their savings by investing in a fixed-interest bond, a commentator has suggested.

Personal finance columnist Nick Gardner wrote for News Limited that bonds are effectively "an IOU" issued by a range of bodies including the federal and state governments as well as private companies.

He said that government bonds are "extremely safe" if bought at issue and held until maturity but noted that because they are traded on the open market, it is still possible to lose money if they are bought and sold at the wrong time.

"With interest rates on the rise, a bond paying a yield equivalent to five per cent will be less attractive in a few months’ time so the capital value of the bond could fall,’’ Pawan Luthra of Wealth Creation Advisors told Mr Gardner.

The comments may encourage people to compare term deposits, which Mr Gardner said are another means by which customers can get a good return for their money.

Kevin Benger, chief executive of credit union Community CPS Australia, recently told news.com.au that savers are benefiting from high interest rates on their accounts, many of which are over and above the Reserve Bank of Australia cash rate.

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