Retail bonds are bonds which are offered to ‘retail’ investors (general public) and traded on the Order Book for Retail Bonds (ORB).
Bonds of this nature tend to be issued by larger-listed companies such as Tesco and National Grid. They prove to be popular with investors due to the perceived security of the type of companies offering the bond, and the superior interest rates compared to bank savings accounts.
Besides the promise of superior returns,retail bonds also have the advantage of being traded on the London Stock Exchange’s ORB system. – so investor’s have an option to exit before maturity if there is an emergency need for capital. This is in contrast to min-bonds which cannot be freely traded.
Although the main disadvantage associated with retail bonds is that they are not covered by the Financial Services Compensation Scheme, so an investor could lose out on interest payments and their outlay if the paying company was to go bankrupt.