Cue the 100 watt bulb!

[anigo]

Let's say you have a 10-year, $5,000 bond with a coupon rate of 5%. If interest rates go up, new bond issues might have coupon rates of 6%. This means an investor can earn more interest from buying a new bond instead of yours. This reduces your bond's value, causing you to sell it at a discounted price.

New bond issues might have a coupon rate of 6%.

Nobody told me that we were comparing old bonds to new bonds. I thought the company always sold bonds for the same amount of money and at the same interest rate. Yay for the internet!! (Thanks gunhed)

Further in an article...

In a bullish bond market, investors buy bonds to take advantage of an expected fall in interest rates and a rise in bond prices.

I thought that read "In a bullshit bond market". Well, my friends, if you're looking for the bullshit market, you've come to the right place.

Comments

[jynxgirl.livejournal.com]

I read it as bullshit too.