Why is the bond price in the opposite direction to the market interest rate? After reading the following, you can fully understand. (The full text is about 2600 words)
What is a bond? (four basic elements)
2. Three types of bonds (long-term bonds, short-term bonds, national bonds, local bonds, corporate bonds, corporate bonds, convertible bonds, medium-term notes, short-term financing bonds, interest rate bonds, policy bank bonds, credit bonds ...).
3 What are the risks of bonds? (Two kinds of risks in essence)
4 One of the new favorites of financial management is "fixed income plus" products (bonds also belong to fixed income products)
What is a bond?
Bonds, also known as fixed income securities, can be understood as certificates for investors to obtain interest regularly and return the principal and interest at maturity. The biggest feature of bonds is that bonds are products directly financed by the state, local governments or enterprises, relying on the credit of the state, government or enterprises. Most bonds are more than one year, and the income will vary greatly because of the different issuers.
In bonds, it mainly includes four basic elements: bond face value, bond price, bond repayment period and method, and bond interest rate.
The face value of bonds refers to the face value of bonds, which is the principal amount that the issuer should repay to the bondholders after the maturity of bonds, and is also the calculation basis for enterprises to pay interest to bondholders on schedule.
The bond price refers to the price when the bond is issued. Theoretically, the face value of a bond is its price, but it is actually due to various considerations of the issuer or changes in the supply and demand relationship and interest rate in the capital market. The market price of bonds is often divorced from their face value, sometimes higher than face value, sometimes lower than face value. The face value of a bond is fixed, but its price often changes. )
The repayment period of bonds refers to the time from the issuance of bonds to the repayment of principal. The repayment period of different bonds is different, some are only a few months, and some are as long as more than ten years. The repayment period should be indicated on the front of the bond. The length of bond repayment period mainly depends on the issuer's capital demand period, the changing trend of market interest rate in the future and the developed degree of securities trading market.
The method of debt repayment refers to one-time repayment or installment repayment, and the method of debt repayment should also be indicated on the front of the bond.
Bond interest rate refers to the ratio of bond interest to bond face value, which is the calculation standard of the remuneration promised by the issuer to the bondholders in a certain period of time.
Two kinds of bonds
I believe that many investors are often confused when reading the relevant information of the bond market. The types of long-term debt, short-term debt, national debt, local debt, corporate bonds, corporate bonds, convertible bonds, medium-term notes, short-term financing bonds, interest rate bonds, policy bank bonds and credit bonds are indeed confusing topics for many people. However, if classified, we will find that it can actually be divided into interest rate bonds, credit bonds and convertible bonds.
Interest rate bonds are risk-free income securities with interest rates close to those of the state or relevant state institutions. With national credit as guarantee, there will be no default risk, such as national debt, local government debt, central bank bills and policy bank bonds. These bonds will certainly not default, because even if there is pressure to repay, they can be repaid by issuing more money. Interest rate bonds are often sought after by risk-averse investors because they have no default risk and have the property of hedging.
National debt is a kind of government bond issued by the central government to raise financial funds. The main issuer of national debt is the Ministry of Finance, which is endorsed by national credit. It is extremely safe and has always been regarded as a risk-free income. Local government bonds are bonds issued to the market by the financial departments of provinces, municipalities directly under the central government and cities under separate state planning. Judging from the local government bonds issued in 2020, the issuance period is longer.
Corporate bonds are bonds raised from the public by joint stock limited companies or limited liability companies in order to raise funds through issuing bonds, which are divided into public offering and non-public offering.
Corporate bonds refer to the securities issued by domestic enterprises with legal personality in accordance with legal procedures and agreed to repay the principal and interest within a certain period of time. The issuance period ranges from 3 months to 10 year, and the income varies greatly with different issuers.
Credit bonds refer to bonds issued by entities other than the government, and certain principal and interest are agreed to pay off cash flow. Their yields increase the risk premium on the basis of risk-free returns. These bonds are usually issued by private companies, state-owned enterprises, commercial banks and other institutions. The degree of premium depends on the issuer's credit. Corporate bonds, corporate bonds, medium-term notes, short-term financing bonds and asset-backed bonds all belong to credit bonds.
Convertible bonds are essentially credit bonds, but they are highly related to the stock market. Convertible bonds, as the name implies, are bonds that can be converted into stocks. They are usually issued by listed companies for the purpose of refinancing, and have the characteristics of bonds and stocks at the same time, so they can generally correspond to the positive shares of the corresponding listed companies. Its full name is convertible corporate bond, which is a special corporate bond that can be converted into common stock at a specific time and under specific conditions. With the dual attributes of creditor's rights and equity, it is also known as investment and financial management that can be attacked and defended.
3 What are the risks of bonds?
If you want to invest in bond funds, you must first understand the risks of bond funds. In essence, the risk of bond funds comes from the bonds themselves, but some risks also come from the scale of bond funds and fund managers. Generally speaking, bonds are inherently risky in two directions:
First, credit risk. Credit risk, also known as counterparty risk or performance risk, refers to the risk that the counterparty fails to perform the due debt, which can be understood as the money borrowed by others will not be repaid in the end. Generally speaking, the issuers of interest rate bonds are basically endorsed by central or local governments, so it can be considered that there is no credit risk. However, in addition to interest rate bonds, including credit bonds and convertible bonds, their issuers are mainly entities other than the government, so it is necessary to consider the existence of credit risk.
Second, interest rate risk. Interest rate risk refers to the possibility that the uncertainty of market interest rate changes will cause losses for investors to invest in bonds. In an environment with relatively high inflation, this risk will be relatively high. Interest rate bonds are mainly affected by interest rate changes, including long-term and short-term interest rates, macroeconomic operation, inflation rate, and the amount of money in circulation. This also determines that among interest rate bonds, credit bonds and convertible bonds, the market price fluctuation of interest rate bonds is relatively small, while credit bonds and convertible bonds can fluctuate greatly under certain circumstances. Private placement network is free of subscription fee.
4 One of the new favorites of financial management "fixed income+"products
The advantage of "fixed income" strategy is to focus on bond investment and strive for relatively stable income. Even if it is not a bear market for A shares, but a bear market for bonds, the bonds invested in this part can earn coupon income by holding them until maturity.
What is fixed income+?
In recent years, "fixed income+"has become a hot word in the financial circle. "Fixed income+"appears around 20 16. Under the background of the gradual implementation of the new asset management regulations, the traditional financial management needs urgently need new investment tools to connect-both net worth products and relatively stable income.
"Fixed income plus" is actually an investment strategy, that is, most assets are invested in fixed income assets such as bonds. On the basis of striving for basic income, we should look for certain opportunities in various strategies to improve the overall income under fixed income plus strategy. In other words, the income under this strategy is mainly divided into two parts, namely "fixed income" and "+"income.
The era of lying down to earn money is gone forever! The cargo base fell below 2% and the stock market was depressed. "fixed income+"has become the new favorite of financial management?
First, firmly accept the bottom. The fixed income in "fixed income+"refers to the fixed income, that is, the income paid at the pre-agreed interest rate. The fixed income in "fixed income+"usually refers to bond assets with more certainty of relative income and less risk. Similar to pure debt funds such as short-term interest rate bonds and selected credit bonds, this part of assets is equivalent to a basic disk, which can provide relatively stable basic income.
Second, the "+"part is an "elastic income source" based on fixed income. What is actually diversified depends on the detailed investment strategy formulated by the fund manager and the flexible areas he is good at. The "fixed income plus" strategy is mainly aimed at investors who pursue stability. Product forms are usually dominated by stable investors and enthusiasts. For this "+"part, the fund manager will try to capture certain profit opportunities while controlling the exit.
It is worth noting that the "+"part is both a benefit and a risk. Beyond the bond level, there are many investment strategies that can be added, such as stock investment, innovation, fixed convertible bonds, stock index futures, government bond futures and so on. As long as they can increase their income opportunities, they may become a+part of the strategy. Different fund companies have different "fixed income+"products, and the strategies behind the "+"part will be different.
Therefore, the so-called "fixed income+"is simply backed by bonds, adding other assets to increase income, such as investing in convertible bonds and stocks, and pursuing higher income while maintaining stability.
Relevant financial management knowledge:
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