Bond Basics

Individual Investing in Bond Markets in Europe

The amount of direct investing in bonds in Europe by individual investors and the types of bonds and risk profiles they prefer varies by country and by other factors such as previous experience with loss or gain. Overall individual investor participation is less than five percent of the EU bond market. The vast majority of direct investment is contributed by institutional investors such as pension funds, insurance companies, mutual funds and banks.

Direct holdings of fixed income securities by individual households vary a lot in countries which have larger individual investor participation in bond markets. While in Italy the amount may be as high as 20% or more of total financial holdings (in 2004, average more than €12,000); in Germany, the percentage is between 10-15% (in 2004, some €5,800) and in other countries they will be typically lower than 5%. (In 2004, average British, Spanish and French households held around €1,000 in bonds.)

In the same 2004 study, for Italian individual investors, bonds are a major component of total financial assets (22.4%). By contrast, the lowest figure is that for the UK (1.5%), while the US is at an intermediate level (6.9%). Where deposits and cash are excluded to take into account only investment in financial products, the portion of bonds in Italian individual investor portfolios rises to 30.7% (against 2% for Britain and 7.9% for the US). In Belgium, Germany and Italy, direct holding of fixed income securities by individuals are significant and preferred; in other European countries, individual investors make bond investments primarily through funds.

There are several ways to invest in bonds. Although the number of individual investors who participate in the bond market is low in Europe, you can buy individual bonds, bond funds or unit trusts. 

Global Markets

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Government Markets

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Sub-Sovereign Markets

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Corporate Markets

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Collateralised Debt Markets

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