When market interest rates fall, bond fund returns do rise.

The two major factors that affect the performance of bond funds are interest rate risk and credit risk.

Although credit risks are currently rising, defaults are still a minority phenomenon and have little impact on earnings. The main problem lies in interest rate risks.

When market interest rates fall, the interest rates on new bonds increase, causing funds to flow out from old bonds to new bonds. The price of the old bonds held by the fund falls, and the net value of the fund is calculated based on the bond price, which naturally follows.

Generally speaking, changes in market interest rates have a greater impact on long-term bonds than short-term bonds. Therefore, market interest rate fluctuations have a greater impact on bond funds with a longer average maturity in the bond portfolio. If investors expect that market interest rates will decline for a long time, the average investment maturity will be relatively

Longer bond funds for greater returns.