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Questions tagged [bonds]

Use this tag for questions that relate to debt instruments known as bonds. Generally, money is lent to governments or corporations that is paid back with interest.

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What is the effect of a Fed Reserve rate cut on corporate bond funds?

What is the likely effect of a Fed rate cut on corporate bond funds like VTC? I would think if the Fed rate goes down it would make the corporate bonds more valuable as their dividends become ...
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4answers
1k views

What is the purpose of bonds within an investment portfolio?

Are bonds part of an investment portfolio so that you can invest during a dip in the market? (I heard this from a robo-advisor as it allows you flexibility to invest during a downturn) Or do bonds ...
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1answer
85 views

What's to prevent majority shareholders in a company from dilluting a convertible note?

A company issues a convertible bond to an investor. It has a par value of $10,000 and can be converted into 5 shares. The company currently has 50 outstanding shares, so the bond corresponds to ~9% (...
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1answer
90 views

Why does the asset price of REITs go down when (US) bond rates go down?

REIT s often pay up to 10% dividends so I would think they should become more valuable when the US bond interest rates go down . For example : In the last 30 days CIM has gone from 19.1 to 18.5 while ...
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3answers
84 views

Variation in the price of bond

The price of a bond can vary because: the yield curve changes the flow of time (the time to maturity is reducing, for example compare a 1 year ZC bond with a 0.5 year ZC bond) How can I quantify the ...
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4answers
481 views

If Turkey doesn't go bankrupt, is there any chance they won't pay bonds profits?

Suppose I buy 5000$ worth of Turkish treasury bonds today and the yearly interest rate for 1Y bonds is roughly 25%. Assuming Turkey doesn't go bankrupt in the next year, is there any chance I won't ...
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1answer
49 views

Bond income calculation question

I thought I got my Bond income right, but my brokerage company's calculator got me totally confused. So here is the problem: I bought a note (US treasury) yesterday: cusip: 912828TN0 (secondary market)...
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2answers
110 views

How to pick ETFs that hedge against stock market crashes?

If I want to hedge against a stock market crash the advice I often see is “diversify” and “buy bonds.” As a result, my portfolio is primarily Vanguard VTI and Vanguard BLV, the total stock market ...
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3answers
78 views

Bond fund vs High interest savings account

If you have some money - lets say 20k USD. Banks such as Ally provide 2.2% interest rate on Fixed deposits. Is investing in bond funds such as VBTLX safe and better than fixed deposit? Understand ...
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2answers
117 views

How can I practically buy bonds?

A moderately low risk of investment is a government bond. If I understand correctly, I spend €1000 on a 5-year bond at a yield of 1%, then in 5 years I get back 1000*(1.01)**5=€1051.01, unless the ...
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2answers
255 views

Is there a catch in investing in treasuries close to maturity date?

Is there a catch to invest to treasuries close to maturity date? I don't want to lock the money for a long time, b/c the interest rate probably will go up. But I am concern that it's not that simple. ...
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2answers
195 views

Bonds, interest rates and inflation

I was reading Learn to Earn by Peter Lynch and I came across a paragraph that has confused me to say the least. It is regarding bonds - If you buy a $10,000 ten-year bond and hold it for ten years,...
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109 views

U.S. 10 year treasury bonds behavior during crisis

It's often advised to buy and keep government bond to protect ourselves against the next upcoming crisis. (For example, in a defensive stock portfolio you can have 50% of stock and maybe 30% of ...
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0answers
29 views

Explanation of Macaulay duration for bonds?

I understand how to calculate duration but I'm a bit confused about what it actually tells me and how it is useful and I can't seem to find anything that tells me. If a bond has a maturity of 5 years ...
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1answer
58 views

Bond prices changing due to interest rates

I feel as if I'm missing a fundamental step here. I'm aware that bond prices fall as yields go up; but what makes yields go up? If I had a bond issued in the UK for example, and the base rate went up ...
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2answers
196 views

What kind of bonds are ideal for short term investments

I have money in my bank right and I want to acces them in 1-2 years. I am not willing to take the risk in a stock portfolio, but willing to make bond investments riskier than buying government bonds. ...
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0answers
32 views

Computing risk-neutral probability of spot rates

I am trying to use a binomial model to price options wtih bonds as the underlying security.If the current term structure is flat at 6%, but next year, I assume the one-year spot rate will be either 5% ...
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1answer
43 views

Bond Duration with respect to time

How would the duration of a coupon bond change with respect to time. Would you use the original price, and yield to determine the new duration, or would you have to calculate a new price for the new ...
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2answers
201 views

Why don't investors in negative-yielding government bonds put money in positive-yielding government bonds instead?

According to this news article, USD10 trillion has been put into negative-yielding long-term government bonds. https://www.ft.com/content/b131da2e-4f02-11e9-b401-8d9ef1626294 Why don't these ...
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1answer
34 views

Selling ETFs in Roth IRA fund, in exchange to buy Bonds tax implications

I would like to sell ETFs in my Roth IRA fund, in exchange to buy Bonds. What are the tax implications of this? Even if the money is still held in the Roth IRA fund, would I get taxed?
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3answers
324 views

Are there any non-decreasing securities on the stock market?

Are there any securities traded on the stock market (i.e. ETPs) that never decrease in value? As an aside (in case anyone mentions bonds): I'm aware there's ETFs for AAA-rated government bonds, but ...
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1answer
84 views

Common diversification strategy for bond investment?

What is the most common diversification strategy for bond investment for a long term investor? long vs. intermediate vs short term inflation protected (TIPS) US vs world government vs corporate etc. ...
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2answers
62 views

Mutual Fund or Municipal Bond

I am new to this Bond's so, I am not sure which one is a good investment like state or federal bonds? Is it worth to Invest now?
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3answers
85 views

How does a bond's coupon rate differ from its market yield rate?

I'm trying to understand how bonds work and am confused by coupon rate vs market yield rate. Suppose company Foo issues a bond with a face value of $1 million, a 4% annual coupon rate payable semi-...
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1answer
162 views

Bonds near maturity better than 3-month CDs? Need help explaining Bond stats

I have a ton of money in a checking account earning 0% interest. I thought about buying 3-month CDs with 2.25% interest (or 0.56% per 3 months), something short term so my money isn't locked up for ...
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56 views

Bond ETFs slowing down after 2015. - why?

I see a lot of bond ETFs have very low gain, or even stay flat during 2015. - today. For example Eurozone Government Bond or US Treasuries. What is the reason for this?
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22 views

Annualized return of bond fund

How do you calculate the say a 10-year annualized return of FTSE TMX Canada High Yield Bond Index. Please dumb it down as to the process.
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1answer
74 views

How often are callable bonds called?

I understand that this is highly dependent on several factors - but as I make calculations with YTM, YTC, and YTW, it would be helpful to understand the (very general) likelihood of a bond being ...
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1answer
108 views

Coupon Payment Date

For a bond that pays interest semi-annually, is a must for a coupon payment date to fall on exactly the same day? For instance, if the bond matures in June 30, 2025, the coupon payment dates shall be ...
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1answer
38 views

Active Bond Funds - Interest Rate Swaps

I am a long time investor in an active Australian Bond fund (set & forget type of thing) but lately I have been doing a lot of research and I have realised that bond managers use a lot of ...
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2answers
49 views

How do stock markets react to economic data like consumer price index, home sales, and job data? [closed]

Where can I learn about how the stock market reacts with the consumer price index, home market market numbers, bond interest rates, fed interest rates , GDP change, how the euro bond market affects ...
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2answers
7k views

Can an American birth certificate be redeemed for money?

Can an American birth certificate be redeemed for money? Why is it printed on bond paper?
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4answers
177 views

Calculating total return of a bond

I'm trying to understand bond yields, prices and coupons. I get the basic concepts (i.e. coupon is the interest paid in each period and prices and yields are the inverse of each other). I don't ...
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69 views

How do I solve this exercise with bond and probabilities?

I have a bond with coupon rate 10% and annual coupon payments with maturity 3 years, face value 1000 and yield to maturity 8%. The bond pays the first coupon with 20% probability and nothing with 80% ...
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1answer
52 views

Annuity vs Bond Returns

The way I understand it buying a simple term annuity from an insurance company is like depositing money in a account that earns fixed interest compounded for the duration of the annuity and taking out ...
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1answer
60 views

Extra large margin for government bonds

The value of my brokerage account is $1000x (Fidelity if it matters). Looking at my balances, I see that I am afforded an additional "government bond" buying power which is about $2250x. My regular ...
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24 views

convertible bond

ABC Limited has in issue 14.5% convertible bond currently quoted on the NYSE at $108 per $100 nominal immediately after payment of the annual interest. The bond will be convertible into ordinary ...
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1answer
42 views

Interest rate risk of bond that is held to maturity

While reading online about interest rate risk associated with bonds it stated that if an investor plans to hold a bond until its maturity then interest rate risk is insignificant since the final ...
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1answer
43 views

Calculating Bond returns as an annual compounded rate

I've been reading up on bonds and the different methods there are of calculating the yield of the bond. So suppose I bought a $1000 face value with a 5% coupon that pays semi annually for $995 with a ...
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3answers
87 views

Bonds Yields and Coupon Rate

I read about bonds. Let's say the face value is 1000 rupees and the coupon is 10%. The coupon will be 100 which will be issued at the end of the year if the maturity is one year. Is that correct? ...
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1answer
113 views

Portfolio questions

I am constructing a portfolio and considering a number of different security classes: Stocks, commodities, ETFs, currencies and bonds. In order to decide which securities to include in my Portfolio ...
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1answer
93 views

Holding period return and YTM

Suppose I purchased a 2 year bond at par $1000 paying 10% annually. Then the YTM is 10% but the holding period return would be 20%. Shouldn't those 2 values be the same since I am holding the bond to ...
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10answers
18k views

Why would anyone buy U.S. Treasury Bills?

From the Treasury Direct website, I saw this Bills: U.S. Treasury Bills are a type of short-term security of one year or less, usually issued at a discount. The discount is the amount the security ...
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1answer
41 views

Effective Yield for Bonds

While reading up on the effective yield for bonds I noticed that it relies on the fact that the investor reinvests their coupon earnings in order to take advantage of compound interest. However, does ...
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2answers
264 views

Why would I buy bonds? [duplicate]

Say I want to buy a bond that matures in 10 years, and that pays out 5% of once a year, so it has 10 payouts remaining. Say the value is 100$. Say the bond is being sold for 140$ today. I would be ...
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1answer
49 views

CAT & ILS Bonds/funds [closed]

I'm constructing an portfolio with the objective to diversify as much as possible. I would like to include securities that are uncorrelated with the financial markets. The last few days I've been ...
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4answers
1k views

Are bonds worth the investment since they don't compound?

I was talking with my parents and they told me they have been buying 30 year EE bonds at $100 every 2 months with an interest rate of 4%. Because it is an EE bond, it does not pay a monthly coupon. So ...
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1answer
56 views

Treasury Expected Yield vs. Reality Difference

I looked at the US treasury website https://www.treasurydirect.gov/instit/annceresult/annceresult.htm and the usual percentage of interest one should get is around 2.4%. So, if I bought a 4-week ...
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44 views

Bond prices - present value

I'm reading a text of Macroeconomics - Financial Markets as a chapter. It has a line which states: "Suppose you hold two-year bonds. Because the price of a two year bond is $P, every dollar you put ...
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1answer
64 views

basic questions about US bond trading

I'm new to the bond trading, but have some basic questions. Let's suppose I want to buy the following bond today (11/6/2018) See this As you can see there, the maturity date of that bond is 11/30/...