But before you dive in ask yourself, why is the variation so huge? Fifty times if you think about it - yet still next to nothing compared with post-war yields we had got used to.
There are four elements to pricing interest rates, all of course anchored around the central bank key rate and what the commercial competition is offering.
Gilt 10-2 year yields
First the standing, known as the credit rating of the issuer (the borrower, remember). Usually sovereign debt in any country is considered top quality, but as we've seen with Greece this can change dramatically. Therefore the example above NS&I is the best quality and should be used as the baseline. The clearer's rates are obviously out of whack and must reflect savers' apathy - as well as being an insult to our intelligence. The higher bond rates on offer relate to the fact the issuer is not a household name.
UK Retail Price Inflation
The second element influencing the setting of interest rates is time to maturity. Usually, the longer you borrow the money for, the higher the cost. In the industry this is known as the yield curve where plotted on a graph the X axis starts at overnight, through to one week, one month, three months, one year, five, 10 and 30 years being the most common. The Y axis plots yields from 0 to as high as you need. Tables are turned in our topsy-turvy world so that now some Y axes have to start with a minus number, say Swiss 10-year government bonds and money markets at almost minus 1 per cent, then up through to zero at maturities over 10 years to a top rate around 1 per cent (positive).
Gilt 10-year yield
The currency the debt is denominated in matters. If it is a perennially weak currency, like the Argentine peso or Zimbabwean dollar, you need a lot more interest income to compensate for the exchange rate risk. Before you laugh, remember that at times the pound has been a really sickly currency, explaining interest rates that are usually higher than Germany's.
Swiss 10-year yield
Finally the inflation rate of the currency. Many are moaning today that too many bonds have a negative yield. But when hyperinflation in the 1970's hit 15 and 25 per cent in the US and UK respectively, long-dated government bonds yielded 15 per cent at best - making for negative real interest rates of up to 10 per cent. Today when Swiss 10-year bonds hit minus 25 basis points and inflation is minus 0.9 per cent, the real yield is a positive 65 basis points - higher than that of US two-year treasury notes which yield 50 basis points nominal, 60 basis points real as US inflation is minus 0.1 per cent.
Learn to calculate rates - exactly.
MORE FROM NICOLE ELLIOTT...
Nicole Elliott is a long standing Member of the Society of Technical Analysts and has just taken over the IC's trading coverage. She is regularly interviewed and quoted by the financial media, is a conference speaker, and author of several books on charting.
