In October I recommended Government bonds – gilts. On that day, Royal Bank of Scotland’s shares closed at 90p and the FTSE 100 closed at 4605.22.

As I write, shares in RBS stand at 23.1p, and the FTSE 100 at 3671.85. Those that followed that advice have done well.

To quote Warren Buffett in his letter to shareholders on Friday ‘investors of all stripes were bloodied and confused, much as if they were small birds that had strayed into a badminton game.’ I’m rather comforted he and I feel the same. Equity markets remain volatile and it is no surprise given the prospect that interest rates will fall to near zero, investors seek another asset now.

Corporate Bonds are more risky than Gilts given that it is debt to companies rather than the UK Government. These are at the low end of medium risk – they can’t be categorised as low risk as they are not cash or Gilts Bonds are repaid on a given date at 100p, and offer a fixed rate of interest which makes them attractive for income seekers.

The spread between bid and offer prices can be wide, and you buy the accrued income which is paid out annually or half yearly.

The prices are less volatile than equities. Liquidity can be an issue as many investors are holding on until redemption.

I have been buying bonds below par (100p) so as to not suffer any capital loss and I have avoided the financial sector.

The list is extensive but four examples would be: 5.25 per cent Next 2013 – flat yield of 5.74 per cent, yield to redemption 7.39 per cent. Offer price 94.4p. (Income paid 30/09) 5.625 per cent Marks & Spencer 2014 - flat yield of 5.92 percent, yield to redemption 6.69 per cent. Offer price 98.2p. (Income paid 24/03) 6.625 per cent Allied Domecq 2014 - flat yield of 6.9 per cent, yield to redemption 7.44 per cent. Offer price 100.95p.

This is one notch below investment grade but I’m happy with that increased risk given it is reducing its debt pile by divesting itself of non-core acquired assets and this has now moved above 100p so you will suffer capital loss if held to redemption. (Income paid 12/06) 5.875 per cent, National Grid 2024 - flat yield 6.11per cent, yield to redemption 6.18 per cent. Offer price 98.4p. (Income paid 02/02) It is possible to increase the yield but that comes with greater risk and I am happy with around 6 per cent overall. At some point inflation is going to come back big time with central banks printing money and this will be a negative for corporate bonds as interest rates will rise. But my view is that interest rates will go lower, and remain low for longer than many expect and, for now, corporate bonds look good value.

WARNING: Opinions expressed are the writers’ judgments at the time of writing. The information does not constitute a personal recommendation and readers should seek their own professional advice as to the suitability of the investments.