Article Side

Online Article Directory!

Hello Guest! Login or Register to submit articles!

Factors that Affect Bond Prices

By Chris Adam Subscribe to RSS | March 19th 2012 | Views:
loading
 
  



Investors treasure bonds, as they are relatively less volatile than stocks. However, there are a lot of factors that influence bond prices. These factors make bonds extremely vulnerable to economic changes subsequently depreciating their prices. The movement of bond pricesbond pricing is inversely proportional to interest rates, which means higher the interest rates, lower the bond prices and vice versa.

For instance, if a bond was issued for $10,000 for five years with an interest rate of 6% paid to investors every six months and you wished to sell it at a time when the interest rate went up, you would have no other choice but to discount the face value. of the bond so that the buyer could get a market rate for the bond. On the other hand, if the interest rate had gone down, you would get a chance to sell it at a premium over face value.

Understanding the way bond pricingbond pricing moves, is a little tricky and requires a lot of experience in bond trading. This does not mean investment in bonds is not profitable. But if you are not ready to risk big money, then you must choose shorter term bonds than those with longer terms. A broker would give you an idea as to how bond prices change and the risks associated with holding long-term bonds.

It is safe to conclude that inflation is your worst enemy when it comes to prices of bonds. It is very logical; there is rise in inflation expectations, interest rates, and bond yields leading to a sharp fall in bond prices. You need to study the economic activity or consult an expert who can predict future economic activity while trading in bondsthem. Financial experts usually analyze the yield curve to understand the movement of economy to help you make sound financial decisions that can reap long-term benefits.

Chris Adam - About Author:
For more information on bond prices, check out the info available online; these will help you learn to find the bond pricing!

Share on Facebook Tweet It Stumbleupon this post This post is delicious !

Article Source:
http://www.articleside.com/business-articles/factors-that-affect-bond-prices.htm

Related Business Articles Subscribe to RSS

Various pricing strategies adopted by companies to improve sales
Published by Annphilip on March 8th 2012 | Business
Pricing strategy depends on both the external factors and the internal factors of an organization. S...
 
How do Name tags Australia help in establishing a customer bond?
Published by Simon Smith on January 10th 2012 | Business
Name tags Australia provide an edge to the customer service and salespersons. Customers feel more se...
 
Peru Amazon Tours in Tambo Blanquillo and Regions to Experience Near By
Published by Tracy Narvaez on August 25th 2012 | Business
On the way to the lodge from Cusco there is a cloud forest, various rainforest habitats and a small ...
 
Gardening and Outdoor Living Retailing in Emerging Markets: Market Guide to 2016
Published by Bharatbook on August 25th 2012 | Business
Bharatbook.com introduces a report Gardening and Outdoor Living Retailing in Emerging Markets: Mar...
 
Time to get the latest university news
Published by Gene Crayton on August 25th 2012 | Business
Education is a never-ending process. Each day you get to learn something new which may or may not be...
 
Voice over Agencies- Helping Hand for All Your Voice over Requirements
Published by Julia Roger on August 25th 2012 | Business
It is important that you choose a voice over agency that is reputed and is in the business for a con...
 
Use Outlook for Conference Room Scheduling
Published by Julia Roger on August 25th 2012 | Business
It is best to use different color codes for meetings in different conference rooms that will help in...
 
Use Outlook for Conference Room Scheduling
Published by Julia Roger on August 25th 2012 | Business
It is best to use different color codes for meetings in different conference rooms that will help in...