Bond markets lack transparency

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The Financial Times has noted that:

Retail investors are being prevented from investing in the UK corporate bond market because of the way the market is structured, according to a new report.

The Investment Management Association (IMA) has warned that investors find it difficult to understand the risks of different corporate bonds, because of the large number of bond issues and the complex way they interact.

It is also difficult to design and implement best execution rules that are “critical” for investor protection, the IMA said, because of the lack of transparency in the market.

This is a damning indictment of the City.

It is also a considerable obstacle to those of us who want to use bonds as the basis for rebuilding the green infrastructure of the UK, as suggested by the Green New Deal.

The fact is that almost all real investment in the UK is now financed by bonds, and almost none at all by share issues. And the fact is that both corporate shares and bonds remain unattractive precisely because business is so clueless about the future. After all, let’s face reality: no one needs new cars any more since oil is very obviously running out and there really are a limited number of electronic toys anyone needs. The need for investment is almost entirely in socially owned infrastructure because that is quite clearly what people are short of, in which case an effective retail bond market has to be established to let people buy the financial securities needed to fund that development.

Reform is needed, now. At least the IMA has recognised that.