So sometimes we will see that after the long holiday, bond funds suddenly have a much larger increase than before, because the data is updated and the income is concentrated after the long holiday.
Did the bond fund lose money?
As we all know, bond funds are famous for their stable returns, but there is still the possibility of losses. When encountering a bond bear market, bond funds will also experience a decline in income, a continuous decline or even a loss.
We must be clear that in the current investment market, in addition to the products that are not guaranteed in bank deposits and money funds, the net value of wealth management products means that the products that are guaranteed before this will also face the risk of fluctuation. Compared with other stock funds and index funds, bond funds have low risk and small fluctuation, but the debt base also has bull market and bear market, which will continue to fall under unfavorable environment.
So what specific impact will it have on bond yields?
First of all, we must find out the source of income of bond funds. The income of bond investment mainly comes from coupon rate and price difference.
Coupon rate refers to the fixed interest rate printed on the face of bonds, usually the ratio of annual interest income to the face value of bonds. When issuing bonds, it has been agreed that interest will be paid directly at maturity, which is a known quantification.
The spread varies with the change of bond price. Theoretically speaking, the face value of a bond is its price, but in practice, due to the influence of various factors, the bond price will often change. If the bond market is good and the price rises, you can earn the bid-ask spread, which is an unknown variable.
The Influence of Interest Rate on Bond Price
When the economic situation is not good, the central bank will reduce the market interest rate by lowering the deposit reserve ratio or directly cutting interest rates to stimulate economic development. It is more conducive to the financing, survival or expansion of production of market entities; On the contrary, when the economy is overheated, it will generally raise interest rates by raising interest rates to cool the economy.
The central bank's interest rate reduction, that is, the process of lowering the interest rate of the whole market, is a good opportunity to invest in bonds, especially long-term bonds.
When the interest rate level rises, the attractiveness of bonds relative to other assets will decrease, which means that the maturity income of bonds will decrease and bond funds will fall; On the contrary, when the interest rate drops, the attractiveness of bonds will increase compared with other investment products, which means that the bond yield will exceed expectations, so the bond price will rise.
When the market interest rate is at a high level, the falling process is a good opportunity to invest in bonds.
However, the yield of 10-year treasury bonds above 3% is already relatively high, and the management also stated that monetary policy will return to normal to ensure that the people's money bags will not shrink.
Therefore, there is basically no possibility of a sharp interest rate cut, but the possibility of a sharp interest rate hike is also very low, so it is more cost-effective to buy a debt base now than before. In addition, from the perspective of asset allocation, bond funds can balance the risks of the whole asset.
The above is the relevant analysis of bond funds, hoping to help you.