Investing in a low-interest environment

In his letter Bonds Prospectuses (September 9), economist Karm Farrugia quite rightly tried to explain the terms used by issuers of prospectuses such as "unsecured" and "subordinated" bonds.

Few people except persons in the financial sector really understand the nuances and ranking of these bonds being issued. Investors are in most instances attracted by relatively high interest rates being offered without bothering to study the prospectus and the relevant risks involved.

Relatively high rates may appear quite attractive to investors in an attempt to maintain their level of income in a low interest rate environment.

Moreover, none of these issues or issuers is rated by a recognised rating agency. With the increasing number of companies taking advantage of the prevailing low interest rates offered by the banking sector it may be time for the MFSA to introduce a system to rate these bonds.