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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.

14
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7answers
7k views

Are bonds really a recession proof investment?

I believe that another crisis is imminent if Trump goes ahead with deregulation of financial firms. Whether that is true or not is not my actual question. In that context, I want to protect my 401K ...
2
votes
0answers
62 views

Are Credit Default Swaps an adequate hedge for leveraged bond portfolio?

A hedge is supposed to be a cheaper bet that pays off if a primary bet isn't profitable. With a leveraged bond portfolio, my understanding is that a credit default swap (CDS) can help hedge, but I'm ...
3
votes
3answers
204 views

Should I invest my money in an ISA or Government bonds? (Or any other suggestion)

I am a UK citizen who works in the IT industry, I have recently turned 21 and I live at home with my parents and have no real commitments or bills. I have saved up quite a sizable amount of money in ...
4
votes
1answer
8k views

Why bonds with lower coupon rates have higher interest rate risk?

According to the following article: Bonds offering lower coupon rates generally will have higher interest rate risk than similar bonds that offer higher coupon rates. And: For example, ...
1
vote
3answers
317 views

Any reason to hold large amounts of cash over bonds?

This question assumes one has an appropriately sized emergency fund already established. If I expect the equities market to decline in the next year or two - what specific circumstances would make ...
0
votes
0answers
213 views

Do bonds make sense as an investment right now?

I live in Ohio in the US and I have a sizable chunk of change tucked away in cash. I think that political and economic conditions are a little to unpredictable. (Ok TBH, when has anything to do with ...
11
votes
3answers
2k views

Should I exclude bonds from our retirement investment portfolio if our time horizon is still long enough?

My wife and I (ages 35 and 38) have 25-30 years until we reach retirement age, and I'm doing some research regarding our asset allocation. In addition to various podcasts, articles, and online posts, ...
5
votes
1answer
150 views

Are Italian bank bonds as good a deal for retail investors as it seems?

The Monte Paschi announced bailout claims that retail investors will be protected from losses imposed by the bailin by compensating them for up to €100k (the financial services compensation scheme ...
22
votes
3answers
9k views

Bought agency bond (FANNIE MAE 0% 04/08/2027), now what?

I just bought 15 of these for $10,677 through my brokerage firm. It says 3.3% interest. I have no idea how this works. But I trust it is gov bond and will pay 3.3%. Can anyone explain how it works? ...
1
vote
1answer
355 views

Why are premium bonds more likely to be called than discount bonds?

For premium bonds in the US (ie, bonds trading at a price over par) with a call option, why are they more likely to be called than a bond trading at a discount?
1
vote
1answer
137 views

Possibility of default of Corporates A, AA, AAA bonds

Have one heard these A, AA, or AAA bond can default. If there is a possibility, what should I do? buy US treasure only?
4
votes
1answer
176 views

What bonds do I keep and which do I cash, why is the interest so different

I have some US treasury EE savings bonds worth 25 face value, purchased more than 10 years ago, none of them fully matured at this time. Some of the bonds are earning 4% APR, others 1.3%. Should I ...
3
votes
3answers
712 views

When the market crashes, should I sell bonds and buy equities for the inevitable recovery? [closed]

I'm told that for my age, I should have about 1/3 of my portfolio in bonds and 2/3 in equities. Suppose I implement that with this portfolio: 100k of SPY 100k of IWM 100k of TLT Now suppose that ...
4
votes
1answer
532 views

Is the principal of a savings bond taxable, or only the interest?

Let's say I cash out some government savings bonds with a face value of $2,000. Since they are 10% bonds the total amount I get when I cash them out is $2,200. Do I owe taxes on the full $2,200 (...
3
votes
1answer
2k views

I have 50k and want to build up a passive income [closed]

Right now I have 50k/no debt and I am trying to build up a passive income. I need something that will generate me around 5k a year. I'm a little scared and don't know much about investments. I'm ...
2
votes
0answers
107 views

Question Regarding Bond-Coupon Prices with Partial Period Maturity Date

Question: What would you pay for the following bonds assuming an annual yield rate of 7% based on semi-annual compounding (assume face value = $100)? A bond with a coupon rate of 6% maturing in 3 ...
3
votes
3answers
1k views

Do governments support their own bonds when their value goes down?

I'm far from expert in finance, so please bear with me. It's my understanding that a company who issued stock typically support it when the stock price go down. Does the same thing happen with ...
-2
votes
1answer
70 views

effect of bond issue on income statement [closed]

Say a company issued a bond and received $100. Was this $100 revenue? Should it be recorded on the income statement as a revenue item, please? Why or why not? Thanks.
0
votes
3answers
133 views

collateralized mortgage obligations

I was reading a comparative description in between CDO's and CMO's on Investopedia.com and I cant seem to understand the following statement: When the mortgages underlying a CMO are of poor credit ...
7
votes
2answers
2k views

What does S mean in a bond name?

Recently i read many bonds names such as Elevated Railroad First 5s, United Drug Company 7s, etc. What does 5s or 7s mean?
0
votes
3answers
199 views

How does a bond fund fall in value?

Obviously the bonds will loose value if the issuer defaults, but if there is a stable, predictable number of defaults in the funds bond holdings, how does a bond fund fall in value? I know that the ...
1
vote
1answer
84 views

Cash or Bonds (UK)

I'm currently making my way through Benjamin Graham's book. He mentions that ± %25 of assets should be held in either cash or bonds. Could someone clarify the government bonds situation in the UK? Is ...
1
vote
0answers
282 views

Early tender offer is less than the current value of the bond. What is the benefit?

I received an early tender notice for a bond I hold: Terms: $815.00 per $1000 P.A. plus int. In addition, holders who tender their notes prior or on 08/25/16 (The Early Tender Date) are ...
1
vote
2answers
211 views

Are savings accounts just as safe as government bonds in terms of counterparty risk?

It seems that holding plain cash (say after selling stocks and waiting for other opportunities to come up) in a brokerage or bank account is a bad idea (due to counterparty risk) (Clenow, 2015). ...
5
votes
2answers
722 views

How to read bond yield quotes? What do the time, coupon, price, yield, and time mean?

I am newbie in finance and I recently saw Bloomberg bond yields quoted as follows: Can anyone specify what "1 month" and "1 year" mean? What do coupon, price, yield and time (EDT) mean?
6
votes
5answers
253 views

CIBC bonds with negative return [duplicate]

There is a story on CBC that investors are lining up to buy bonds with negative return from Canadian Imperial Bank of Commerce (CIBC). I don't understand why they are doing so. Can someone explain ...
1
vote
2answers
210 views

Why aren't bond mutual funds seeing huge selloffs now? [closed]

Bonds 101 is that when interest rates go up, bond prices go down. Interest rates are generally expected to be rising over the foreseeable future (although it might take a while), which means that ...
1
vote
1answer
65 views

What can I do to remedy ISA cash/shares transfer latency?

I discovered recently that in the UK, money deposited in a cash ISA could be transferred to a stock ISA and vice versa. Of course the sum invested in cash + stock is constant (there is a yearly ...
0
votes
1answer
272 views

What mean that a `Bond` has no bid-ask value?

From what I've seen, most Bonds have no bid-ask value. What does that mean exactly? Supposition 1): Nobody is trying to buy or sell this Bond. In this case, which is a good value to estimate the ...
1
vote
3answers
701 views

When short negative yielding bonds, who pays the coupon

Assuming the bond was actually issued with a negative coupon, if you are short (borrowing someone else's bond to sell the bond at a lower price / higher yield) Who pays the coupon? There are at ...
0
votes
1answer
175 views

Selling bonds before full maturity but after some coupons have been paid out

I'm currently working on the following practice problem and I'm not really sure where I'm going wrong... "Some time ago you bought a bond issued by Mazota cars. The bond when issued had 10 ...
1
vote
1answer
182 views

How to calculate the value of a bond that is priced to yield X%

I am currently practicing for a beginners exam in finance. One of the previous exams had the following question: You own a 2 year, £1000, 7% bond, with semi-annual coupons. If the bond is priced ...
8
votes
1answer
1k views

Bond gain is greater than remaining coupon payments. Time to sell?

I wanted to learn about bonds so I bought a rather risky one (Chesapeake Ene Corp SR NT 6.62% 08/15/2020 / 165167CF2). Since purchase, the price of the bond has risen 72.81% for a gain of $257.02 as ...
0
votes
1answer
74 views

Government or Corporate Bond?

I understand investment is about risk and reward - including risk management of course. I'm trying to build a personal portfolio for growth and or regular income for the next 10-20 years. I'm trying ...
2
votes
3answers
1k views

Do high interest rates lead to higher bond yields or lower?

Interest rates & bond yields are positively correlated according to this: http://www.investopedia.com/ask/answers/04/031904.asp Thus High interest rates => High bond yields But at the same time, ...
6
votes
2answers
216 views

What does basis point mean?

S&P's schedule of costs mention that getting a rating from them currently costs "6.25 basis points" of the offering. Does this literally mean 6.25%? As in if the bond produced was 100 million in ...
1
vote
1answer
471 views

How do short term treasury bills work?

I'm trying to understand what return I'll get on 1 month treasury bills. I want to invest in something that has minimal risk, minimal management, and flexibility to get my money out. I'm looking at ...
4
votes
3answers
13k views

How to calculate new price for bond if yield increases

I am learning for a class that is partly about finance and I don't have any background in finance at all. I am struggling with a question that was asked in last years exam: A bond trades at £1015, ...
3
votes
1answer
341 views

How to buy US saving bonds if I am not American?

I am not an American citizen, but I hold a social security number because of an H1B visa. I would like to purchase some U.S. saving bonds, but I currently don't live in the U.S. How can I buy those ...
0
votes
1answer
430 views

Interest Rate vs. Annual Percentage Yield (APY) [duplicate]

I'm curious as to what the difference between the Interest Rate and Annual Percentage Yield is. For example: This Bank I was looking at offers 0.45% interest rate on savings account balances over $...
0
votes
1answer
334 views

perpetual bond that yields 0%

As far as I understand perpetual bonds are endless and don't mature. So why would anybody invest in one that does not yield? You don't know when/if they are going to pay.
12
votes
1answer
3k views

200%+ return in 10 years from…bonds?

I read an article this morning about a million dollar bet Warren Buffett made with a hedge fund that would take 10 years to determine the outcome. They didn't each put down a million dollars, rather, ...
7
votes
3answers
276 views

Why would I buy a bond with a negative yield?

The only reason that I can think of is because I expect the bond to appreciate in price thus offsetting the loss in yield. I could still end up with less money than I started with, if I hold the bond ...
3
votes
5answers
181 views

Is the need to issue bonds a telltale sign that the company would have a hard time paying coupons?

Background I'm trying to solidify my understanding of bonds, and I have a question regarding something that's probably very basic. Question Say I have a company and I want to issue some bonds in ...
2
votes
1answer
169 views

Stocks and Bonds in Roth IRA vs non-tax-advantaged

I have an account with Vanguard. I have a Roth IRA, Rollover IRA (from my 401k from a previous job), and I have a standard non-tax-advantaged account. Currently, all 3 accounts are fully Vanguard ...
4
votes
2answers
703 views

Bond strategies for a steepening yield curve?

If it is believed that the yield curve is going to steepen very soon, it may be fall in short-term rates, a rise in long-term rates, or some combination of these. What strategy should you pursue in ...
0
votes
1answer
148 views

Where to invest, that compounds interest more than annual?

Forgive my ignorance, I found this webpage compounding weekly and noticed the 0.24% 7 day rate. I have heard that there were secure investment vehicles that compounded interest more frequently than ...
23
votes
4answers
5k views

Why would I not buy a bond for less than face value?

The way I understand it is that if you own a bond at maturity you will get the face value of the bond at that time. So if you can purchase a bond at $80 which has a face value of $100 why would I ...
5
votes
3answers
704 views

Investment strategy for retired couple

My parents are retired (71 and 75), their house is paid off, and they have a moderate amount of savings between some IRAs and bank accounts. All of their savings is in cash or money markets, and it ...
1
vote
1answer
69 views

Municipal Bonds and Taxes

A certain investor buys a a Municipal bond for $10,000. He then collects $3000 of tax free interest from the bond and after some time sells the bond for $8000. Does he have a capital loss for tax ...