Economics Stack Exchange
Economics Stack Exchange

Questions tagged [bonds]

Bond markets and legal aspects of bonds. For government debt use the tag "government debt" unless the fact the the debt is in the form of bonds has significance.

217 questions
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Does the initial bond price equal the face value?

When a bond is issued, does the buyer necessarily pay the face value? (I am not talking about consols or zero coupon bonds, just about an ordinary bond that, for simplicity, pays a coupon once a year.) When I ask this question on Google, I get a…
Richard Hardy
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Relationship between default risk and value of bond

In particular Mortgage-backed securities. I've read from a book that underestimating the risk of default is tantamount to overestimating the value of the bond, giving rise to a bubble in MBS. I'm unclear of how that works. My guess is that since…
sendmeat
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Yield curve flattening- abstract question

I just stopped and thought about the current economic state, and yield curve in particular. As you can see here, the yield curve is starting to flatten, means longer bonds demand is high, while short term bonds demand are low. This is happening due…
gabi
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How do you calcualte Yield To Maturity, given only the coupon rate and current required rate of return?

Suppose today a 10 per cent coupon bond sells at par. Two years from now, the required return on the same bond is 8 per cent. What is the YTM? ^That's a question I've been asked and have literally no clue about how to calculate the YTM. My…
Azman
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Making mathematical sense of the expression for realized bond return

I came across the following statement regarding the realized 10-year maturity bond's return over a year: The realized bond return (H) over a year has two components: the yield income earned over time and the capital gain or loss due to yield…
Milan
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Do corporations outside of the Eurozone issue bonds in Euro?

Do corporate issuers outside of the Eurozone (as in the wider EU area, or non-EU countries) issue bonds in Euros (EUR)? How relatively common is this, compared to issuing bonds in USD, if you are a non-US and non-Eurozone debtor? Would that qualify…
P A N
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Why can principal not be lost, if a bond fund is held for a period equal to its duration?

[Source:] Which leads us to the key message for investors: as long as your time horizon is at least as long as the duration of your bond fund, you won’t lose any capital. You’ve probably heard people say they prefer individual bonds to bond funds,…
user4020
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Why did the US credit rating downgrade in 2011 decrease US government bond yields?

I'm not sure how bond yields were decreased by the US credit rating downgrade in 2011. Since the credit rating is down, shouldn't the yields increase since the US government wants to attract more bond buyers?
Sean Taylor
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Isn’t a zero-coupon perpetual bond not worthless if the relevant government has some probability of buying them back?

A government issues perpetual bonds with no interest payments, no coupons: Most economists that are not hyper-dovish would argue such a bond is intrinsically worthless. However, if a government were desperate for some form of credit in regard to…
Larry Gruene
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Bond prices and Brexit

Hope this isn't too simple a question. I read an article that stated that the UK government and EU have reached a draft agreement for a Brexit deal, leading to the following market movements after the announcement. 1) GBP rose against USD 2) Yields…
Rfh
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Difference in spot rates and YTM for government bonds

I'm preparing for CFA L1. I assumed that 3 year spot rate of treasury to be equal to the YTM of 3 year treasury bond. The Schweser notes define spot rate as below Yields on zero-coupon government bonds are spot rates. However in the below example…
Arvinth
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How can I calculate the present value of a bond using YTM?

According to this article, the market value of a bond can be calculated using this equation: However, the YTM itself is dependent on market value: So, how can we calculate the market value of a bond if we need to know YTM, but YTM is itself…
applemonkey496
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Understanding the “Treasury auction results” press release

This is the press release for a recent 30-Year bond auction results: https://www.treasurydirect.gov/instit/annceresult/press/preanre/2020/R_20201112_5.pdf I cannot figure out how the price is calculated. It is not the coupon divided by the yield. So…
Pascal Dufresne
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How does buying bonds reduce bond yield?

I read that Japan rapidly increased the printing of Yen and used the money to buy government bonds. How did this action reduce the yields of their government bonds and prevent them from having a debt crisis like Greece?
Sean Taylor
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Does bond yield always equal the prevailing bank interest rates?

Does a bond's yield (principal and coupon rate) always equal the bank interest rate?
Sean Taylor
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