The new LSE retail bond market

Just a quick note to say the London Stock Exchange’s move to improve government and corporate bond trading starts today.

According to the LSE’s official blurb:

Traditionally private investors have only been able to invest in bonds via a managed fund or ETF (Exchange Traded Fund). However, their ability to invest has just become a whole lot easier.

Why? Through the introduction of our new electronic trading service for bonds – investors, via one of our many member brokers, now have the ability to buy and sell bonds in retail-size (typically lots of £1000) as simply as shares.

The centralised trading mechanism concentrates liquidity, provides all market participants with equal opportunity to see price information and trade at the best available price.

This means that the UK gilt and corporate bond market is no longer just the domain of market professionals, it is now open to investors like you*.

I think the LSE is stretching the truth about bonds a bit there. Private investors have long been able to buy gilts and some corporate bonds in reasonable-sized lots, even if few actually did so.

It’s true that many corporate bonds have been inaccessible due to the minimum deal size, but according to The Times only ten corporate bonds are accessible via the new facility anyway:

At first the offer is limited to 49 gilts, or government bonds, and ten corporate bonds from blue-chip companies such as Tesco, BT, GlaxoSmithKline and National Grid.

You will buy the bonds via your broker as usual, with 21 so far signed up.

I hope to take a closer look in the weeks ahead, but if you have any dealings with the revamped bond market, please let us know how you get on in the comments below.

Incidentally, the new bond market could be good news for investors in the London Stock Exchange; the Italian retail bond market, which LSE controls via an acquisition, has been great for its profits.

ISA reminder! British readers have until April 5th to open a 2009-2010 ISA for tax free saving and investment. Legal and General is running a cashback deal for its share ISAs, including its popular index tracking ISAs.