In general, corporate bonds have priority over stock repayment. Generally speaking, bonds are safer than stocks. If a financial crisis occurs, the profitability of enterprises will decline and a large-scale debt crisis will break out. Correspondingly, bond funds will have different situations.
Financial crisis refers to the situation that all or most of the financial indicators such as interest rate, exchange rate, asset price, solvency of enterprises, and bankruptcy index of financial institutions deteriorate, making it impossible for normal investment and financing activities to continue.
When the financial crisis breaks out, it will cause the stock market to fall and enter a certain degree of bear market, which may lead investors in the market to sell stocks, hedge and buy more relatively stable investment products, such as bond funds and money funds. With the increase of purchasing volume, the price of such products will rise.
At the same time, the price of bond funds is also affected by the market interest rate, which is inversely proportional to the market interest rate, that is, when the market interest rate rises, the net value of bond funds decreases, and when the market interest rate falls, the net value of bond funds increases. Therefore, when the financial crisis leads to the deterioration of interest rates, that is, the market interest rate decreases, it may lead to the increase of bond funds.
Therefore, investors can consider appropriately allocating some bond funds during the financial crisis.
What is the financial crisis
Most people think of the financial crisis, first of all, the stock price crash and the long bear market. In fact, the stock market crash is only an external symptom of the financial crisis, far from the financial crisis itself. The so-called financial crisis, to put it bluntly, is the crisis of the financial system, which is often accompanied by the collapse of financial institutions and the shrinking scale of financial transactions due to the lack of mutual credit.
We know that the financial system, like the blood circulation system in the economy, continuously provides financial support for the economy. Once there is a massive infarction in the financial system, the economic crisis is not far away.
Many financial crises in history are caused by economic problems; The outbreak of financial crisis usually greatly increases the severity of economic crisis, such as the 1929 Great Depression in the United States. It was originally just a crisis, but it escalated into the Great Depression because of the improper handling of the financial crisis. The specific performance is as follows:
First, in order to maintain the gold standard, the Federal Reserve could not let go of the supporting banks that were run, resulting in the bankruptcy of nearly 10,000 banks; Second, bank bankruptcy has seriously blocked the capital flow between the financial system and the real economy, accelerated the economic collapse, and it is difficult to see improvement.
Therefore, Ben Bernanke, chairman of the Federal Reserve, later concluded that the best way to alleviate the financial panic was to inject liquidity into institutions that lacked funds. Just like severe patients in COVID-19, alveolar injury and insufficient oxygen supply will lead to and aggravate various basic diseases. The best treatment is to wear a ventilator, increase the oxygen supply and ensure adequate blood oxygen. In a sense, the handling of the financial crisis is exactly the same. One trillion yuan of capital injection, first of all, to ensure adequate liquidity, to prevent small lesions, and other structural problems are slowly solved.
After the problem is solved, the next question is why the financial crisis happened.
In the eyes of economists, almost all financial crises are related to excessive debt. In fact, the truth is not difficult to understand. The biggest feature of the financial crisis is panic and lack of trust. If the financial situation of institutions is healthy and cash flow is abundant, it is impossible to cause panic. Therefore, it is precisely because there is a large area of excessive debt, so once there are signs of trouble, it is easy to cause panic.