Gilts and bonds

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15. Keeping track of your bond investments

Bond prices change throughout the day, just like share prices. You can find the previous day's closing prices in the main national newspapers, or you can ring your broker for up-to-date prices.

In the papers, gilts will be divided into sections according to whether they are Shorts, Mediums of Longs. For each, you'll see the following columns:

The first column tells you that this is Treasury Stock, paying 8% per year, which matures in 2005.

The next column gives you the current yield which, as you would expect is lower than the nominal yield because the gilt is trading at a premium.

Next is the redemption yield which takes account of the capital loss currently standing on the gilt. It is trading at £106.50, but on redemption you will only get back £100. Assuming four years til redemption, that's an average loss of 1.62 every year for every £100 of stock you own. As a percentage of the current price, 1.62 is 1.5%. Take 1.5% off the income yield of 7.51 and you have the redemption yield of 6.01%.

Next is the current price, followed by the variation on the previous day's price, and in the final columns you can see the highest and lowest prices which the gilt has reached in the preceding 52 weeks.

If you take the Financial Times, the Monday edition provides additional information. It tells you the percentage change in the gilt price on the previous week, the total amount of stock in issue (in millions of pounds), the dates on which interest is paid, the last ex-dividend payment of interest and the Cityline telephone number for real-time price updates.

The FT also publishes bond indices, showing indexed prices and yields for representative baskets of UK gilts and index-linked stocks. These are designed to give you a benchmark against which to judge your own portfolio's performance.

As far as corporate bonds are concerned, the best place to get information is again the FT, which carries information on secondary market prices for the most actively traded bonds in its Tuesday to Friday editions.

1. What are bonds? 2. Different types of issuer 3. Different types of bond 4. Bonds compared to shares 5. Bonds as tradeable instruments 6. Nominal yield 7. Calculation of current yield 8. Capital gains on gilts and bonds 9. Calculating the redemption yield 10. Factors which affect bond prices 11. Are bonds for you? 12. Selecting gilts and bonds 13. How to buy gilts and bonds 14. Unit trusts and bond funds 15. Keeping track of your bond investments 16. Tax 17. Conclusion

• First Steps in Bonds
• Beating the Dow with Bonds
• Understand Bonds and Gilts In a Day
• Pricing Convertible Bonds