Hi all, I'm a person new to investing and currently I'm looking into how the bonds work and have a question. For example, when I go to RBA: CGS Bond Prices - March 2010 I can see that the highest coupon value for the bond listed is 6.50%, like this: Series Number . Coupon . Maturity . Closing Yield . Gross Price . Accrued Interest . Capital Price TB118 . 6.50% . 15 May 13 . 5.260 . 105.964 . 2.442 . 103.522 Also, this bond trades at 103% of face value, which means that if the bond is kept to maturity, the real profit is way smaller than 6.5% A quick google search tells me that the ANZ offers 6.2% on its term deposits. There are banks that offer more, with larger minimum deposit amounts. Now, I understand that the word "bond" usually goes with "diversifying the portfolio". And diversifying the portfolio means that I will not lose everything at once, and also, if some part of the portfolio loses, another part will probably win depending on the various factors. The government bond security is guaranteed by the government. The bank deposits are also guaranteed by the government (up to some amount, as I remember - 250,000?). Looks like they are about equal in risk from this point of view. Generally, bonds are considered to be slightly higher in risk than cash and provide higher rate of return (but, obviously, I'm missing the mechanism - how do they provide a higher rate of return?) So, the question is - what is the reason to invest into bonds (as a small individual investor)? Something that makes them at least as attractive as keeping money in the bank? Let's look at the long term investing returns, assuming I'm not trying to speculate on bond price fluctuations. (Can we also assume for simplicity that the interest rates remain constant and we're not trying to predict which direction they move in the future?) Thank you.