Comments on: When Interest Rates Go Up Bond Prices Fall

By: PANKAJ JOSHI

PANKAJ JOSHI — Thu, 21 Jul 2011 07:33:35 +0000

thanks bro.
it was too simple & easy to understand.

By: Convexity of Price and Yield for Bonds… and Rising Interest Rates | WhereDoesAllMyMoneyGo.com

Mon, 28 Feb 2011 03:04:11 +0000

[...] between bond prices and changing interest rates. If you are not familiar with this concept, it is worth reading before continuing with this post. However, if you understand why bond prices rise/fall when interest rates fall/rise, then [...]

By: Preet

Preet — Thu, 04 Jun 2009 16:56:57 +0000

@JasonT – thanks for the correction! Post has been amended to read “8% divided INTO $70″. Cheers!

By: JasonT

JasonT — Thu, 04 Jun 2009 13:12:09 +0000

” 8% divided by $70 = Better price to pay for the bond = $875.”

Should read,

$70 divided by 8% = Better price to pay for the bond = $875.

By: Preet

Preet — Mon, 18 May 2009 14:45:12 +0000

@Jonduk – saying that you “overpaid” is probably not the precise term to use. If you got the bond at the market rate, then this is the fair price for that point in time based on the overall opinion of the market (doesn’t mean that the market is right, but it doesn’t mean you overpaid either). If interest rates go up, then yes, your 30 year bond would fall in price, but note that if you just held the bond to maturity you would get all the interest payments (and return of principal) that you bargained for. A lot of people think interest rates will go up in the future, and this should be priced into the market as well. A lot of people are keeping their bond durations short while they wait for interest rates to increase before extending maturities… but you should discuss your personal strategy with your own qualified financial advisor.

Thanks for stopping by!

By: Jonduk

Jonduk — Sun, 17 May 2009 21:25:56 +0000

Is that mean If I buy 30 yr govt bonds when interest rate at all time low, I over paid? If the Federal Bank decided to increase interest rate for the next few months, my bonds will lost it value?

By: Margie Martin

Margie Martin — Thu, 02 Apr 2009 02:50:46 +0000

Wow! Help for my Finance Courses. Thanks so much… This is great information to do a term paper with….

Thanks

By: Canadian Capitalist

Canadian Capitalist — Mon, 21 Jul 2008 04:09:58 +0000

Ah, I don’t have any data about the trading volume. In fact, reading the sources again, even the Province article might be talking about the total dollar value of trades every year.

By: Preet

Preet — Mon, 21 Jul 2008 03:46:06 +0000

I understand your point – in that you are referring to market cap, but I am referring to trading volume. Does that address your concern, or are you also referring to trading volume? I agree that on market cap there is not an order of magnitude difference.

By: Canadian Capitalist

Canadian Capitalist — Mon, 21 Jul 2008 03:18:56 +0000

I think an order of magnitude is still an exaggeration. It may also be an impossibility. The total Canadian stock market capitalization is approx. $2T. 20 times would make the bond market $40T but the total size of the world bond market is estimated by various sources* to be $45T. Its incredible that the rest of the world put together has a bond market that is only $5T.

*http://en.wikipedia.org/wiki/Bond_market#cite_note-US_bond_mkt_debt-0
*The Intelligent Portfolio