Bond price and yield: You know these relationships

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If you landed on this article months or years after it was published, you didn't exactly escapeWe accept bonds with ten-year maturities, which are quoted and on which interest accrues every year. This means that at any given time there is an evolution of the securities market with similar risk and similar maturity.

Well, quite simply, in the market, an investor can always buy a ten-year security that pays off every year.

Of course, with similar securities that are in circulation, no one will want to buy this bond for ten years, and paying interest on the purchase is necessary for the price to fall, and accuracy must be within reach. At this price, for which interest is paid, you have an indicator, namely, the market indicator. Of course, when the market interest rates fall, there is a antithesis. In our case, for example, if market interest rates go down, there will be a demand for our old bond that will pay annual interest, and the price will match that. If you look at the calculations, then a two-point increase in interest rates leads to a ten-year decline, while a two-point decrease leads to an increase of almost ten years, and then around each point of change there is a correction point or price increase dance. When interest rates rise, the best option is not to have bonds with too long maturities, since the price will only adjust if interest rates rise. For example, if our bond, on which interest is paid annually, has years instead of years, then an increase in the transaction points will lead to a significant decrease in the price from one year to the next.

Fewer correction points compared to more than a decade ago seem to be decreasing on long-term securities.

Therefore it is better to give preference to short-term maturities and variable-rate securities, since the bull market in bonds can be stopped. If you landed on this article months or years after it was published, don't go completely unnoticed. What you are This site uses cookies to provide a better experience on the site.