Bonds are issued by both companies and governments. They are a form of loan. Bonds offer investors a steady income stream over a given period, usually in the form of a fixed amount paid at regular intervals. They guarantee investors the repayment of invested capital at a predetermined time. Bonds are sensitive to interest rate changes and to changes in the credit risk assessments of the bond issuer.

In the investment diversification shown here and in the Asset Allocation Analyzer, the asset class “bonds” represents just the interest component. Risk surcharges, which the higher risk issuers have to pay, should be avoided. This additional interest component is only slightly correlated to interest rates, and is also to be found in the asset class “credit spreads”. Only bonds issued by states with highest possible reputation are included.

In the Asset Allocation Analyzer this asset class is represented by a real bond ETF made up of euro zone bonds with the highest credit ratings, starting from 2007. Prior to this a bond index of German government bonds is used.