08/09/2026
Bonds are the safe part of my pension… aren’t they? ??
Usually they are considered lower risk than shares.
But here’s the part that surprises people …
👉 When bond yields rise, the value of existing bonds can fall.
Simple example.
You bought a bond costing €100 and it’s paying €2 a year in interest/ coupon…
That’s a 2% yield.
A year later a new bond becomes available for the same cost , ie €100 but this one pays € 4 a year , a 4% yield.
So why would someone pay you €100 to buy your old bond only paying €2 per annum interest/ coupon , when they can get €4 elsewhere ??
They probably wouldn’t.
So , the price of your old bond has to fall to make it more attractive.
In a very simplified example:
€2 ÷ €50 = 4%
So for €2 of annual interest to equal a 4% yield, the original bond price would need to fall from €100 to €50.
That’s the key relationship:
Yields up → bond prices generally down.
Yields down → bond prices generally up.
And that’s why some pension and investment funds described as “lower risk” can still fall in value when interest rates move sharply.
The important question isn’t whether bonds are good or bad.
It’s:
Do you know how much of your pension is invested in bonds — and why?
