What factors determine bond yields both corporate and goverment ?
I know that interest rates is a factor but what other factors determine bond yields
- Don GLv 71 month ago
Simply put, a bonds market price is based on the current market rate of interest for bonds of similar risk. The more risk (i.e. a measure of the bond issuer's ability to pay interest when due and to pay the face value of the bond at maturity) the higher the market rate of interest.
- 1 month ago
The interest rate is the RESULT
The factors that drive the rate are: Yield curve and risk.
The yield curve is what happens to rates the longer you to out. TYPICALLY shorter term bonds have lower interest rates than longer term bonds. [SOMETIMES the yield curve is inverted where short term is higher.] [Yield curve can also be flat or nearly so]
THEN for a given spot on the curve each issuer is judged on risk (S&P, Moody's and Fitch) are the three big rating agencies. They assign a rating on how likely the issuer is to fulfill its obligations. The riskier, the lower rating. Especially in Muni bonds, a rating can be raised if the issuer pays for BOND INSURANCE. That is a policy that promises that IF THE ISSUER does not fulfill its obligations the bond insurer will step in and make the payments. It is a fluid thing.Source(s): Retired CPA who worked for a Municipal Issuer and KNOWS Muni bonds. LOL