When it comes to bonds, people immediately think of bond funds or national debt. Yes, most individual investors participate in bond investment through these two channels. I will share the relevant contents of interest rate risk in bond investment risk for you, hoping to help you. Bond investment risk? Interest rate risk

Why should we pay attention to bond investment risk

Speaking of bond risk, from the previous financial frontline wealth work, we often allocate bond funds as stable products to customers, even replacing fixed-income products. For the product configuration whose risks have not been fully revealed, afterwards we can only pray that the bond market will see wave after wave and bull market year after year.

the risk of bonds is indeed much smaller than other types of assets, but the risk is everywhere. Understanding the main risks of bond investment can not only help us identify future risks, but also adjust the investment portfolio in time to avoid risks.

first of all, we have to realize that bonds also have loss risks, which is the same reason that we are facing some inevitable and accidental risks in society. The risks faced by bond investors include many factors, such as macroeconomics, investment strategy and fixed-income bond types. Understanding risks can help us reduce the losses caused by risks. Next, we will discuss the bond risk from interest rate risk, event risk, liquidity risk, credit risk and inflation risk.

interest rate risk

bond prices fluctuate under the influence of the market, and the root of interest rate risk lies in the opposite direction of bond interest rate and bond price.

1 Risk relationship between interest rate and price When interest rate rises, bond price falls; When interest rates fall, bond prices rise.

Keep two things in mind:

For investors who hold bonds to maturity, there is no need to consider the interest rate risk, because the bonds will be redeemed at face value at maturity, and there is no need to pay attention to the fluctuation of interest rates during the period from purchase to maturity.

for investors who may sell bonds before the maturity date, the bond price will change with the fluctuation of interest rate, and investors will bear the interest rate risk.

2 The market performance of interest rate risk is understood from a buyer's transaction process:

Hypothetical scenario: Xiaoming bought 1 million one-year bonds in March 21, accounting for 5% of coupon rate. Then the interest rate went up, and the interest rate of new bonds issued after half a year rose to 8%.

in September, 21, Xiaoming needed money urgently, and he had to sell his bonds in advance and get cash back. At this time, he found that he could not sell the bonds at face value, because his bonds had a low yield to maturity, and people were more willing to buy the newly issued bonds with an interest rate of 8%. If he wants cash flow, he must sell his bonds at a discount. Finally, he sold the bonds for 97, yuan in exchange for cash demand.

summary

summary: any bond has interest rate risk. No matter how good the credit is, when the interest rate changes, the prices of these bonds will fluctuate like other bonds.

3 interest rate risk management interest rate is an important tool for the government to regulate the economy, and investors have little power to control interest rates. Therefore, interest rate risk cannot be controlled to a large extent. However, we can make predictions based on the analysis of the yield curve and adjust the bond maturity in the portfolio to control the interest rate risk. For example, investors can choose bonds with shorter maturities to reduce interest rate risk. Because the longer the maturity of bonds, the higher the sensitivity of prices to changes in interest rates (this relationship is clearly broken down in the duration chapter).

a small debt voucher incident

Ms. Jin's younger brother is preparing for the wedding room and says: Sister, we borrowed 1, yuan from you to buy a house. It's February now. When we get the year-end bonus at this time next year, we'll give it back to you at 7% interest. ?

Ms. Jin thinks: My brother and sister-in-law have a good work unit now, and their income is high and stable. It's definitely no problem to pay back the money after one year. The bank's one-year financial management is also 4.5%. This interest is cost-effective, and it is a younger brother, so I agreed. (To analyze bonds, first analyze the solvency of the borrowing company, and then compare the interest)

The general idea of the loan is as follows: Brother Jin borrows 1, yuan from Sister Jin, and pays Sister Jin 17, yuan one year later. (This IOU is a bond, but the bond we bought on the exchange is a creditor's right and debt certificate issued directly to investors by the government, financial institutions, industrial and commercial enterprises and other institutions in accordance with legal procedures, and promised to pay interest at a certain interest rate and repay the principal according to the agreed conditions. )

a month later, Kim's mother had a heart attack and needed an operation. Ms. Kim thought about it, and the asset that could be realized was the loan. She thought about finding someone to transfer it and exchange it for 1, yuan. (Bonds are divided according to whether they can be transferred. There are two kinds of bonds: negotiable bonds and negotiable bonds.)