What's going on?

Oxford University borrowed �750 million from investors last week by issuing its first-ever bonds � and it doesn�t have to pay them back for a hundred years!

What does this mean?

Oxford, which has been a seat of learning since the 11th century, is considered to be one of the safest borrowers in the world (technically speaking, it�s rated �triple-A� by major credit ratings agencies). This is reflected in the relatively low interest rate that it offered investors: just 2.5% per year, fixed for the entire 100 years. Despite the rather paltry return on offer in exchange for waving goodbye to your money for a century, investors jumped on the offering and Oxford borrowed three times the amount it had initially planned!

Why should I care?

For markets: The strong demand shows how desperate investors are for �safe� investments that pay an income.

UK interest rates, despite ticking up a bit recently, remain near their lowest-ever levels. Yet there are still lots of investors looking primarily for cash income from their investments, rather than a rise in their value � including pension funds, which have to generate cash regularly in order to pay their beneficiaries. Oxford�s bonds offer investors something that�s become extremely rare: decent income from a safe borrower.


For you personally: Oxford�s bonds are less �safe� than they seem.

Yes, Oxford will almost certainly still be around and able to pay back its lenders in a century�s time � but �750 million in 2117 will equally as certainly not be worth what it is today (i.e. you won�t be able to buy as much with �750 million in 2117 as you can now). And that�s the risk investors really take when they lend money for such a long time: that inflation will erode the value of the money. The higher inflation goes, the less that �750 million will be worth in a hundred years� time.