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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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18 votes
4 answers
1k 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 ...
Ellie Kesselman's user avatar
19 votes
2 answers
2k views

How would bonds fare if interest rates rose?

The first thing I learned about bonds is that when interest rates rise, the price of existing bonds tends to fall. Unfortunately, I didn't learn much else about bonds. So I have a couple questions ...
Stainsor's user avatar
  • 3,397
20 votes
3 answers
6k views

How do you short US Treasuries?

As the US government continues to issue record levels of debt, I don't think it can continue to sell that debt at 2 - 3% interest. It will face the simple supply/demand law of economics — the more ...
Muro's user avatar
  • 7,575
9 votes
3 answers
2k views

Long-term cash-equivalent ETFs for "cash" allocation in a portfolio?

My retirement account goal analyzer advises that I keep 3% in cash. My retirement date is over 30 years from now, so I can tolerate heavy volatility and certainly don't need liquidity. Does it make ...
Mike's user avatar
  • 926
0 votes
4 answers
569 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 ...
Lawrence Wagerfield's user avatar
18 votes
2 answers
3k views

What is the best way to invest short term without losing principal?

My wife and I were planning to buy a house this year, but the plan fell through, so right now we are sitting on the money that we saved towards down payment and renovations (prior to now money was in ...
konung's user avatar
  • 283
5 votes
1 answer
418 views

Calculating Bond Yield from Quote

I cannot re-calculate the "asked yield" from today's Wall Street Journal for the following two Treasury notes/bonds: MATURITY COUPON BID ASK ASK-YIELD 5/15/2023 0.125 98.2500 ...
user2297550's user avatar
3 votes
4 answers
1k views

Calculating composite rate from fixed rate and inflation rate for I-bonds

For I-bonds: Composite rate = [Fixed rate + (2 x Semiannual inflation rate) + (Fixed rate x Semiannual inflation rate)] I wonder how to understand the above way of calculating the composite rate?...
Tim's user avatar
  • 5,883
25 votes
5 answers
9k views

Why invest in long term government bonds when the yield curve is inverting?

The New York Times has noted that the US is heading toward an inverted yield curve, which is one of the precursors for a recession. The yield curve is said to be inverted when long term government ...
JoJo's user avatar
  • 672
12 votes
3 answers
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, ...
Jeff Levine's user avatar
0 votes
2 answers
211 views

Yield to maturity (YTM) for a bond - definition

In "Principles of corporate finance" (Brealey, Myers, Allen) the YTM corresponding to a currently priced bond is the "y" unknown from the formula: (present value of a 8.5% coupon ...
Ghita's user avatar
  • 139
15 votes
4 answers
22k views

How do currency markets work? What factors are behind why currencies go up or down?

How do currency markets work? What factors are behind why currencies go up or down? What roles do governments, central banks, institutions, and traders have in the process?
Chris W. Rea's user avatar
  • 31.7k
7 votes
2 answers
5k views

Why does interest rate go up when bond price goes down?

Why does interest rate go up when bond price goes down? Thank you very much!
Bruno's user avatar
  • 203
7 votes
4 answers
2k 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 ...
rhavelka's user avatar
  • 549
3 votes
5 answers
4k views

What are some good books for learning stocks, bonds, derivatives e.t.c for beginner with a math background?

Despite being STEM person, I always wanted to learn how stock & financial markets work. I always wanted to know how those stocks work, what are those bonds e.t.c. The only struggle I am having, ...
L3Z4's user avatar
  • 31
2 votes
3 answers
1k views

How can I calculate the volatility(standard deviation) of a stock price? and/or ROI (return on investment) of a stock?

I'm trying to build my first portfolio, I've already have set out my monetary goals, graded my risk tolerance and determined the asset allocation I wanted to go with. So, now for the next step I need ...
user64362's user avatar
1 vote
1 answer
201 views

What does it mean "Cudahy Packing Company 5s, due 1946"?

I was reading a bond description from "Security analysis" and found this excerpt "Cudahy Packing Company First Mortgage 5s, due 1946." Can some one explain me please the meaning of ...
Ashish Burnwal's user avatar
63 votes
10 answers
15k views

Why don't bond makers just get loans?

I was just looking at investment opportunities, and I found a number of places offering bonds paying up to 12% interest over two years. My first thought was, I can get a loan from my bank for 5% ...
Benubird's user avatar
  • 807
41 votes
10 answers
22k 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 ...
Wapiti's user avatar
  • 683
22 votes
4 answers
6k 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 ...
Aequitas's user avatar
  • 716
17 votes
5 answers
12k views

What is a good asset allocation for a 25 year old?

I have a mid-sized portfolio (under $100K). And am currently in 100% stocks. I have seen some advice being given that states 80/20 bonds will yield similar returns as 100% stocks with less volatility.
Sheehan Alam's user avatar
16 votes
1 answer
13k views

What are some examples of "fixed income" investments?

I'm using an online tool that my broker provides for balancing my portfolio according to my investor profile and it breaks down the suggested allocation into the following categories: Large Cap ...
JohnFx's user avatar
  • 53.1k
13 votes
3 answers
1k views

Has anyone found U.S. Savings Bonds to be effective investing?

Since I was a small child, my grandparents have given all of their grandchildren savings bonds on our birthdays. I'm not sure if it makes a difference, but they are always "EE" series. I had to use ...
Artemis's user avatar
  • 233
11 votes
3 answers
523 views

Why did one-year notes pay more than 10-year notes during the 1980's crisis?

Why did one-year notes pay more than 10-year notes during the 1980's crisis? During the early 1980's, one-year T notes paid more than the 10-year T note, which implies that nobody wanted to buy the ...
Fang Li's user avatar
  • 167
10 votes
5 answers
16k views

Why do 10 year Treasury bond yields affect mortgage interest rates?

Why is it that when the yield on a Treasury bond increases (because people are selling their bonds, I believe), mortgage rates increase as well? Is there any sort of inherent connection between them? ...
Jon's user avatar
  • 629
10 votes
5 answers
1k views

Are long-term bonds risky assets?

I think bonds are debt/loan and fixed-income, so they are risk-free, both short term and long term. But it seems like Bodie's Investment thinks long-term bonds are risky: For example, assume that ...
Tim's user avatar
  • 5,883
10 votes
2 answers
21k 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?
Anthony33's user avatar
  • 149
9 votes
3 answers
393 views

What is a bond fund?

This answer suggested to invest in a Bond Fund and stated that it has been working well for that person. What is a bond fund? What are it's pros and cons?
brainimus's user avatar
  • 966
9 votes
1 answer
809 views

What is a Samurai bond?

I saw this term "Samurai Bond" while I was reading about investing and bonds, but I am not sure about what this is. Can you please explain?
gyurisc's user avatar
  • 2,448
8 votes
1 answer
728 views

What happens to the bond ETF when the underlying bond matures

When a bond matures, what happens to the corresponding bond ETF? It still keeps on going as if nothing has happened. How does this work? I guess there is some kind of rolling over happening here, but ...
Victor123's user avatar
  • 16k
8 votes
2 answers
488 views

How should I be investing in bonds as part of a diversified portfolio?

I often hear that I should diversify my investment portfolio with X% stocks and Y% bonds, ostensibly to mitigate the risk. My question is what exactly this guidance means in terms of HOW to invest ...
JohnFx's user avatar
  • 53.1k
8 votes
2 answers
2k views

In the U.S., what is the easiest way to buy Australian government bonds?

The NY Times says: He cited the example of buying a one-year Australian government bond, yielding 5.25 percent. He said he believed that the American dollar was going to lose value and the ...
dfrankow's user avatar
  • 637
7 votes
3 answers
3k views

Where to find out conversion ratio between General Motors bonds and new GM stock?

I bought some General Motors bonds (ETF-traded under "XGM" symbol) when they were at depressed prices, before GM declared bankruptcy. GM is supposed to be having an IPO sometime in November, and ...
Jason S's user avatar
  • 792
7 votes
5 answers
341 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 ...
Kaveh's user avatar
  • 173
6 votes
2 answers
331 views

Bond prices: Why is a high yield sometimes too good to be true?

Thank you for taking the time to explain me this. I'm looking at bonds prices at Yahoo Finance (see attached image) And it seems to good to be true: A-rated bonds at YTM rates of 11% and more. What ...
cruvadom's user avatar
  • 163
6 votes
3 answers
311 views

Bond Vigilantes: Prices, yields and incentives

I read on Wikipedia that a bond vigilante is "a bond market investor who protests monetary or fiscal policies they consider inflationary by selling bonds, thus increasing yields.". I tried reading ...
Amelio Vazquez-Reina's user avatar
6 votes
2 answers
1k views

Income vs growth securities in a downturn

It's generally accepted that "income (dividends) and growth (capital gains) are perfect substitutes (tax and transaction costs aside)". i.e. "In financial theory, there is no reason for a difference ...
Max's user avatar
  • 165
5 votes
1 answer
314 views

Who sets the prices on government bonds?

I noticed my country Greece wanted to sell bonds last year and they were stating "If they go above 7% we won't sell.". But who sets the price if not them? Why can't they say "the price is 5% and if ...
j riv's user avatar
  • 311
5 votes
2 answers
1k views

Why is my corporate bond portfolio decreasing when my stock portfolio is increasing?

For some reason my CFT, CIU, CSJ, and LWC are -2.95% overall, when the rest of my stocks are at +8%. Is there any specific reason why Corporate Bonds are going down while the market is climbing?
Geo's user avatar
  • 5,825
5 votes
2 answers
3k views

Bond at 94%. Is it a good idea to buy?

I have found this bond issued by Austrian company Do & Co: 3,125% DO & CO-Anleihe 14-21. As I understand, if I buy it now at 93.77 EUR, I will get 100 EUR on March 4, 2021. Is that true or is ...
askolotl's user avatar
  • 308
5 votes
2 answers
196 views

How do bond funds have a higher return that the sum of their bond parts?

In looking at bond funds recently, I've seen many that have a return of about 7% annualized over 5 years. However, their holdings are bonds that return 2-5% annualized. How is it possible that the ...
Brock's user avatar
  • 51
5 votes
1 answer
2k views

Short-selling treasuries instead of borrowing on margin?

Let's say I have a diversified investment portfolio, and I wish to tap a relatively small amount of cash (less than 5% of the portfolio's value) without liquidating any of my positions. I could ...
Tony the Pony's user avatar
5 votes
1 answer
3k views

Can someone explain how government bonds work?

Can someone explain, for irresponsible investors, the maths behind government bonds as presented here? I am assuming that the "coupon" is the yearly interest paid on the original price. Since this is ...
Andrew J. Brehm's user avatar
4 votes
2 answers
325 views

what is the possibility of USA having negative interest rate [closed]

There has been attempt at reducing the interest rates. Apart from, elderly and savers depend on the bank interest and Stock market is driven by interest rates, the true cost of money if becomes ...
Raj's user avatar
  • 3,492
4 votes
1 answer
230 views

Will U.S. downgrade actually help large, financially sound corporations?

From everything I read, the U.S. debt downgrade is expected to drive up borrowing costs all across the board. But I have a theory that it will actually lower the borrowing costs of large, financially ...
Tony the Pony's user avatar
4 votes
4 answers
10k views

Holding bonds through maturity--pros and cons

I'm considering looking into buying bonds, and it seems there are two approaches one can take: Buying the bond and holding it until maturity. Here you get the interest (coupon) as agreed upon when ...
Chelonian's user avatar
  • 2,197
4 votes
3 answers
299 views

Why would one buy a bond with negative rate? [duplicate]

I see presently that many countries outside the U.S. have negative rate government bonds. So you buy one for $101 and in 5 years you get $100 back (face value). (I picked numbers for simplicity). I ...
blacksmith37's user avatar
4 votes
4 answers
776 views

Over the long term, why invest in bonds?

Over the long term, stocks have historically beaten bond returns, even after accounting for the periodic market crashes. The general consensus is that your portfolio should at least be 25% in bonds. ...
user avatar
4 votes
1 answer
1k views

Are money market instrument and short-term debt same?

I am learning some basic concepts in investment. Here is my questions: Are money market instruments and debt (short-term) same? From the two links I provided, they look almost the same to me, ...
Tim's user avatar
  • 5,883
3 votes
1 answer
186 views

What determines the interest rates of government bonds?

It's not clear to me how the interest rate of a specific government bond changes. I would like to make a comparison with cryptocurrency exchanges. Consider, for example, the price of bitcoin on ...
DamiToma's user avatar
  • 193