Three traps for bond investors The price you get for an undated bond if you sell depends entirely on market forces. If, on the other hand, there is a redemption date, the market price will converge to face value as the date approaches. This is especially important when interest rates are expected to rise. While this may not be imminent, they are at record lows and are bound to rise eventually. When they do, bond yields tend to do the same, which automatically makes the price fall. But a dated bond close to maturity will not fall far below face value. An undated bond has no such protection. Bonds whose interest rate can fall Some Pibs stipulate that the issuer can redeem on a set date - and that if it chooses not to, the interest rate will be cut. If you buy a bond simply on the basis of its current yield, you risk seeing your income falling drastically in future. Nationwide Building Society, for example, has a Pibs with a "coupon" (the interest rate based on face value) of 6pc. But Nationwide can buy back the bonds at par value on December 16 2016. If it doesn't, the rate will change to three-month Libor (a common benchmark) plus 2.49 percentage points. The Pibs traded this week at 93p. If Nationwide repays the bonds in 2016, the current yield (taking into account the capital gain by selling at £1) is 8.35pc, brokers at Canaccord Genuity calculated. But if the society decides against redemption the yield will fall to 3.22pc, equivalent to a 61pc cut in income.