Anonymous
Anonymous asked in Business & FinanceInvesting · 5 months ago

If rising interest rates hurts older bonds, does falling rates help them?

I know if rates rise, then people won't want to buy older bonds with the low rates (unless they sell them at a discount). But, does that mean if rates fall then older bonds (w/ the higher rates) can charge even more???

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  • 5 months ago

    Yes the price will definitely rise and it seems very mature and its price reflects at the current rate. And for some times it definitely worked and sometimes it is not working it is completely depend on the existing market value.

  • 5 months ago

    Sometimes. Not much too.

  • 5 months ago

    Yes, First note that price and yield have an inverse relationship so that a bond price will reflect the coupon (amount paid out in interest as specified when originated) in relation to what an equivalent instrument issued now with same maturity and credit would be required to pay. The degree to which a bond would be effected by a change in the current rate is related to how much time is left before the bond matures. A measure of this time and sensitivity to a change in interest rates is called duration and modified duration.

  • 5 months ago

    The market price, all else being equal should rise as rates fall. If you own a XYZ Corp bond that matures in 2025 at 3% and rates fall and XYZ Corp issues new bonds at 2% also maturing in 2025 at par, investors should be willing to pay you more than par for your existing bonds as they have a better coupon.

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  • 5 months ago

    No. Prices may go back up, but the interest rate cannot go up - it's fixed. The owner of a bond can ASK for more money to sell it but can't CHARGE more interest.

  • 5 months ago

    Yes, when rates fall, the older bonds become more valuable and often sell with a premium (the opposite of a discount).

  • Judy
    Lv 7
    5 months ago

    yes,,,,,,,,,,,,,,

  • 5 months ago

    Replace the word "older" with the word "existing" to be more accurate.

    If rates fall then existing bonds (w/ the higher rates) can and do sell for higher prices.

    The amount of time until maturity is more important than the age of the bond. The price of a 19 year old bond that matures in one year will not see as much price change due to a change in interest rates as a one year old bond that matures in nine years.

  • 5 months ago

    With any easily transferable bond that doesn't come due very soon, rising interest rates will cause them to fall in price and lowering interest rates will cause them to go up. That's any bond anywhere so long as it doesn't come due really soon - though there are other factors involved.

  • Bryce
    Lv 7
    5 months ago

    When interest rates fall, the prices of older bonds with higher coupons go up.

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