Bonds are starting to lose their appeal

But it shows how right Keynes was when he said that markets could stay irrational longer than the investor could stay solvent.

Interest rates might be at rock bottom, and buyers of bonds at present prices are making the implicit assumption that there will be almost no inflation for the next 30 years, oblivious of the fact that it has been bowling along here at 3% or more for the last three. Today's figures showed it up again at 3.3%. But the money still rolls in.

What happens when the mood turns is a matter of some concern. Various investment professionals in London know that the liquidity of bond markets leaves a lot to be desired and that this has the potential to embarrass the managers of corporate bond funds, should too many investors demand their money back at once.

If there is a sharp fall in prices they fear it will spark off a rush of redemptions which will exhaust their cash reserves and force them to sell stock into a falling market, thereby reinforcing the downward spiral, causing further falls and a further rush to sell.

They judge — probably correctly — that when sentiment turns in the bond market there will be such a dumping of stock that it could easily turn into a rout.

When this happened to property funds 18 months or so ago it forced them to suspend redemptions — which was inconvenient — or to close altogether which was even more unfortunate.

Bonds have more liquidity than property so it seems unlikely that conventional funds will be forced to close other than temporarily. But that will also be the time when we will find out that not all the funds are quite as conventional as they appear.

Looking at the yields some retail funds have offered clients, it seems impossible these could be achieved simply by buying bonds, so it is probable that many of the spicier offerings are relying heavily on derivatives to manufacture their advertised yields.

There is nothing wrong with this in principle but it does introduce a whole new dimension of risk, and never more so than when the market moves suddenly in the wrong direction. That could be the point when retail investors find that holding a bond fund can be a less comfortable experience than holding the bonds directly.

We are not there yet but the last month has seen a notable upward spike in the interest rates on sovereign debt. There were reasons for this — notably concerns that American authorities were about to embark on a further round of quantitative easing and flood the world with even more dollars.

But the real message is that the market is growing nervous. The long love affair with bonds might not last much longer and the change of mood when it comes could be messy.

M&S forgets its French lesson

There is something slightly surreal in the news that Marks & Spencer is looking to open a store in Paris — so surreal, in fact, that it is probably worth exploring what odds can be got for a bet that in 10 years' time whoever is then the boss of the stores group will decide to shut it down.

That is what M&S does — it spends 10 years at huge cost chasing overseas dreams, followed by 10 years of disenchantment and retreat back to the British core.

We have been here before, not once but several times. For a generation until the Nineties, M&S was the iconic British brand that made permanent losses in Canada and never worked anywhere overseas — except for one store in Paris which the French liked because it saved them having to go to London.

Then in the Nineties, Sir Richard Greenbury, the last of the M&S insiders to make a serious fist of running the group, decided to take European expansion seriously.

His concern was that retail was detail and that the venture would fail if it just tried to replicate what worked in Britain.

But getting the product right for overseas markets was a nightmare because understanding the differences in what women in different countries wanted in size, colour, price and style were too subtle for non-nationals to understand. Even the locals find it difficult enough — as a trip down any High Street demonstrates.

Greenbury's other insight was the need for it to be in the right place, at a price he could afford. An outsider would never get the right location at anything like a sensible price if the locals knew they were coming.

So he spent literally years secretly looking for the right sites in the major European cities, and gradually found the places he wanted. It took a long time though.

Greenbury was nothing if not determined, however, and by 2000 he had built up a European network of almost 40 stores across Germany, France and Spain, had got through the early loss-making years and was beginning to turn a profit — though margins were a long way short of what was typically achieved at home.

Then he retired, the succession was botched, the group fell on hard times and in 2001 the new brooms decided the whole Continental operation should be closed, saying it would never make serious money. A whole decade's work was written off.

Now new M&S boss Marc Bolland wants to open on the Champs-Elysées with a brand which is still a long way short of being the icon it once was on the domestic British shopping scene — and with an offer which is a great deal less distinctive. You have to wonder why they bother.