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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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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
42 votes
16 answers
22k views

Why would I ever put my money into a savings account that returns less than the current inflation rate?

I like a safe investment as much as the next guy. But can anyone give me a good argument on why I should invest in a bond or a savings account that returns less than inflation? It seems to me that I ...
DevShark's user avatar
  • 697
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
35 votes
4 answers
7k views

Opportunity to buy Illinois bonds that can never default?

Today Illinois bonds were downgraded to 1 above junk. The article. Citation from article: Despite the lack of a budget, Illinois has continued to cover payments due on its bonds, and, like other ...
Tony's user avatar
  • 789
26 votes
9 answers
7k views

What does one typically use as a money reservoir for stocks, when they are "on sale"?

I've read about people who claim to have made a lot of money investing in stocks (or funds) after a crash. They say the stocks were "on sale". But I wonder, where did they get the money to buy these ...
Ken - Enough about Monica's user avatar
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
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
21 votes
3 answers
10k 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? ...
Tony's user avatar
  • 789
21 votes
5 answers
4k views

When can you skip bonds for retirement?

Conventional wisdom holds that as one approaches retirement, one should transition from holding mostly risky investments (stocks and mutual funds) towards holding more conservative investments (bonds)....
codeMonkey's user avatar
  • 1,639
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
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
18 votes
6 answers
5k views

Inflation-linked bonds — what's the catch?

This the question Why is there a discrepancy between current inflation rate and I bond rate in the US? I have learned that, at least in the USA, there exist bonds where the yield is guaranteed to be ...
gerrit's user avatar
  • 3,213
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
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
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
7 answers
12k 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 ...
Aravindh Sathish'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
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
14 votes
4 answers
4k views

How can bonds reach 0 and negative interest rates? why would someone buy them? [duplicate]

I know what coupon rate and yield to maturity is but I do not understand very well the interest rate of 0.07% in 1 year Treasury bonds, for example. And how can bonds reach 0 and negative interest ...
DiegoMPz's user avatar
  • 151
14 votes
5 answers
628 views

Why would a company with a bad balance sheet be paying dividends?

As an example, Ford Motors recently reinstated its dividend. It still has a lot of debt and a high debt-equity ratio. Its bonds are still rated as junk. Why would a company like this spend its cash ...
dsimcha's user avatar
  • 747
13 votes
4 answers
3k views

Why doesn't my bond ETF provide a hedge against stock indexes in the way I thought it would?

I own BND in an attempt to hedge my portfolio against my stock ETF declines, based off of the Bogleheads philosophy. I've noticed that with this ETF, over the relative long term, I've made but modest ...
Ken - Enough about Monica's user avatar
13 votes
3 answers
3k views

What is the difference between a stock and a bond?

I am just learning about finances (only 14 years old) and have heard about Stocks and Bonds and I would like to know the difference between these two things and wonder why would I invest in one or the ...
DavinKF's user avatar
  • 405
13 votes
1 answer
6k views

Why is this T-Mobile bond priced so low?

T-mobile Bond: https://markets.businessinsider.com/bonds/t-mobile_usa_incdl-notes_202020-26_regs-bond-2026-usu88868ag68?miRedirects=1 So the current price is 39.20. It has a coupon of 1.5%, and will ...
ronald christenkkson's user avatar
13 votes
2 answers
5k views

Why don't companies buy back their own (cut-price) debt?

A thought occurred to me today. Glencore's debt is trading at about 70% of face-value. If you're Glencore, what's to stop you buying that debt yourself and pocketing the difference? In particular, ...
Kaz's user avatar
  • 2,499
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
12 votes
4 answers
4k views

Why would someone buy bonds with yields comparable to US Treasury bonds?

Fidelity is showing the following chart for current bond yield rates: For 1-year bonds, US treasure currently offers a 1-year yield of 4.62% which is above or comparable to: Corporate AAA/AA bonds: ...
JonathanReez's user avatar
  • 5,862
12 votes
1 answer
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, ...
public wireless's user avatar
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
12 votes
5 answers
416 views

What to sell when your financial needs change, stocks or bonds?

Say I have a portfolio composed of 80% index funds, and 20% bonds. This portfolio was created under the assumption I would have a relatively large income, and wouldn't need to withdraw any funds for a ...
ripper234's user avatar
  • 2,400
11 votes
2 answers
3k views

Do bonds become more valuable right before a coupon payment?

I'm learning about fixed income for the first time and my understanding is that the value of a bond depends on three major variables: The face value The time to maturity The coupon rate a.k.a. the ...
Paul Razvan Berg's user avatar
11 votes
3 answers
6k views

What happens to Bonds if a company is bought out by a private equity firm?

If you have Corporate Bonds in a company and that company is bought out, by a Private Equity Firm. What happens to the bonds that were issued? Is the new Private Equity Firm responsible for that debt?
Ender's user avatar
  • 898
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
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
10 votes
5 answers
17k views

If I buy bonds near the maturity date, is it a short term zero risk investment?

Right now I'm studying how bonds work and from what I have studied, the crucial thing about bonds is the maturity date, where you are assured you'll get the principal if you sell at that time, and the ...
Zaenille's user avatar
  • 4,334
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
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
3 answers
667 views

Should I buy individual bonds for my retirement portfolio, or stick to funds/ETFs?

To avoid the fees on bond mutual funds or exchange traded funds I have been thinking of buying actual bonds inside of my retirement portfolio. Does that make sense or are there drawbacks to consider?
user avatar
10 votes
1 answer
2k views

Do x-year treasuries become y-year treasuries (x-y) years later?

My understanding is that treasuries can be bought and sold (which is what causes their changing interest rate because of their changing price). Since they aren't static/locked assets, does that mean ...
Runeaway3's user avatar
  • 2,898
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
9 votes
1 answer
2k views

Yield on municipal bonds versus treasury

I'm looking right now at the yields in Municipal bonds and Treasury bonds on Bloomberg: https://www.bloomberg.com/markets/rates-bonds/government-bonds/us and I see that yields on Municipal bonds are ...
Victor's user avatar
  • 343
9 votes
3 answers
466 views

What is a "Junk Bond"?

I was reading Barbarians at the Gate and I read that junk bonds were required to do large leveraged buyouts. What is a junk bond and how does it differ from a regular bond? Why is there higher risk/...
Zameer Manji's user avatar
9 votes
4 answers
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 ...
akyeung's user avatar
  • 153
9 votes
1 answer
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 ...
Daniel Storm's user avatar
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
5 answers
2k views

Roth IRA = Emergency Fund. Any Safe Investments?

I've been building my emergency fund through automatic deposits into a Roth IRA at TDAmeritrade. This has been working well, since the money is out of sight, out of mind, and I can easily withdraw it ...
MattMcA's user avatar
  • 837
8 votes
1 answer
2k views

TreasuryDirect.gov not showing monthly interest gained on an I bond

I bought an I bond on treasurydirect.gov and it was filled on 10/1/2022 (more than 1 month ago at the time of writing). My understanding is that I bonds accrue interest monthly but when I login now it ...
sedavidw's user avatar
  • 249
8 votes
1 answer
301 views

Savings account versus corporate bond

I am looking at buying a bank corporate bond instead of placing money into a savings account. Say I buy a 2 year maturity corporate bond, that yields exactly 2% per year (in terms of yield to ...
DevShark's user avatar
  • 697
8 votes
4 answers
8k views

Can I convert interest income to capital gains by selling t-bills before maturity?

I've been buying 6-month treasury bills. The interest is taxed at maturity as interest income. If however it could be taxed as short-term capital gains, I could avoid paying any taxes on it because I ...
Kyle's user avatar
  • 181
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

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