What is the relationship between the rise and fall of bond funds and interest rates?
The rise and fall of bond funds is inversely proportional to the market interest rate. Without considering other factors, as long as the market interest rate rises, the net value of bond funds will fall, the market interest rate will fall, and the net value of bond funds will rise.
So why is this? Most bonds have a fixed coupon rate. When the market interest rate rises, bond investors will sell bonds and turn to wealth management products with higher yields, which will lead to a decline in bond prices. When the market interest rate falls, the relative yield of bonds will rise. At this time, everyone will buy bonds, and bond prices will rise.
In addition to interest rates, the net value of bond funds is also affected by credit risk. The outbreak of general credit risk is far more "lethal" than interest rate fluctuation, because credit risk means that the issuer is unable or unwilling to repay the principal, which will lead to a large number of bonds selling, which will lead to a sharp drop in bond prices. This situation is what we often call the "bond storm".
Bonds are actually divided into interest rate bonds and credit bonds. The credit risk of interest rate bonds is very low, which is generally only affected by changes in market interest rates, while credit bonds are affected by two factors.