Anonymous asked in Business & FinanceInvesting · 1 month ago

What factors determine bond yields both corporate and goverment ?

I know that interest rates is a factor but what other factors determine bond yields 

2 Answers

  • Don G
    Lv 7
    1 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
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