Bonds are common fixed-income investments that can be used to reduce the volatility of one’s investment portfolio. When I first started buying bonds I had these newbie questions which I didn’t know where to ask.
How’s Bond Price Determined?
When new bonds are issued by the borrower, they are issued at the face value. If you buy them and hold them to maturity you don’t have to worry about bond prices, as you will get your full principal back. However, if you would like to trade an existing bond, its price will be determined by supply and demand, which is ultimately affected by the interest rate, inflation, and credit health of the borrower.
Interest Rate, Bond Yield, and Bond Price?
The interest rate usually refers to the percentage of principal a lender will charge annually on a loan, most of the time the benchmark interest rate is set by the central banks and followed by other banks and financial institutions. Bond yield is the annual percentage profit the investor receives from the bond investment. The yield of new bonds reflects the interest rates at the time the bonds are issued. Eg. the current interest rate is 4%, a new bond issued will have a yield of 4%. If you buy a bond at $100, you will receive $100 x 4% = $4 coupon per year.
However, if the interest rate raises above 4%, the yield of new bonds will be higher too. If you want to sell your 4% yield bonds at this moment, nobody wants to buy them at your face value since they can easily buy new bonds at a higher yield. You have to discount your bond prices to sell them. So your bond prices decrease. That’s why bond yield and bond price are inversely correlated.
Long-Term Bonds vs Short-Term Bonds
I used to think long-term bonds (say 30-year bonds) are less risky than short-term bonds (say 5-year bonds). I was wrong. Long-term bonds are more sensitive to interest rate changes and hence riskier. Long-term bonds have a greater duration than short-term bonds, the probability of interest rate changes during 30 years period is much higher than 5 years period. Also, each interest rate change will result in a higher change in bond price since there are still many coupon payments left which are affected by the interest change. A bigger bond price change is needed to cater to all the affected subsequent payments.
债券是一种常见的用来减少投资资产波动性的固定收益投资。当我开始购买债券时，我有这些菜鸟问题不知道哪里去问。
债券价格是怎么决定的？
当债券被发行时，它们会有一个面值。如果你购买新债券然后一直持有到债券到期，你不用担心债券价格的问题，因为你会完全拿回你的本金。可是如果你要去交易一个现有的债券，它的价格就是由供需关系决定了，最终会被利率，通膨，和债券发行者的信用健康而影响。
利率，债券收益率，债券价格？
利率指贷款方每年向借款方征收的本金的百分比的费用，通常是国家的中央银行制定给其他银行和金融机构的。债券收益率是债券投资者每年能拿到的收益百分比。债券收益会反应当下的利率。如果当下利率是4%，新的债券就会有4%的收益率。如果你买了一个100块的债券，你会每年获得100 x 4% =4块的收益。
但是当利率高过4%时，新的债券的收益率也会变高。如果这时你想要卖掉你4%收益率的债券，没有人想100块买你的，因为他们去买新的债券可以获得更高的收益率。你只能把你的债券降低价格出售，所以你的债券价格降低。这就是为什么债券价格和债券收益率是反相比的。
长期债券和短期债券
我曾经以为长期债券（30年的）比短期债券（5年的）风险低。我弄错了。长期债券对利率变化更敏感，风险也更大。因为长期债券的时效长，30年内利率变化的可能远远大过5年内的利率变化。而且每次利率变化对长期债券的价格印象也更大，因为长期债券还有更多次没有交付的利息，这些都会被利率变化影响。考虑到接下来的所有的利息支付，所以造成更大的债券价格变化。
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