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Play in the bond market | the price of a bond

Did you look dumbfounded when you clicked on this article? Isn't the bond price clearly written in the product brochure? Is it still changing? Congratulations, it seems that you have come to a thorough understanding of the product manual.

But this is still at the ideal stage. In theory, the face value of a bond is its price. In practice, however, due to factors such as the supply and demand market and market interest rates, the market price of a bond often deviates from its face value. In other words, the face value of a bond is fixed, but its price is constantly changing.

So what mysterious force is specifically affected by bond prices? Several factions emerged in FUTU BULL mind in an instant-coupon rate, profit expectations, maturity, creditworthiness, economic and inflation prospects, supply and demand, future monetary policy, risk appetite, speculative factors...complexity Simply persuade the enthusiasm for learning.

But in fact, the biggest force driving bond prices changes comes from changes in market interest rates. Generally speaking, there is a negative correlation between interest rates and bond prices-when market interest rates rise, existing bond prices fall; conversely, when market interest rates fall, existing bond prices rise.


This seems not easy to understand, so FUTU BULL sacrificed myself again to help everyone understand.

FUTU BULL bought a one-year corporate bond with a face value of 100 yuan at the beginning of the year. The coupon rate was 5%. At that time, the bank deposit interest rate was 3%. One year after the maturity date, FUTU BULL will get 105 yuan with principal and interest. A month later, Niuniu suddenly used the 100 yuan and wanted to sell the bond. But at this time the bank interest rate rose to 5%.

Banks and bond interest rate yields are similar, and of course no one is willing to take the risk to take over bullish bonds. FUTU BULL was anxious to sell, so he had to sell it at a low price. As a result, when interest rates rise, bond prices fall.

I originally thought that the decline in interest rates is not a good thing, because the yields of traditional wealth management products will all fall as a result, but in the bond market, the opposite is true. Sure enough, there is a magical force in the bond market...

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