factors affecting bond price

from the calculation formula of bond investment yield r = [m (1+rn)-p]/pn, we can get the calculation formula of bond price p = m (1+rn)/(1+rn), where m is the face value of the bond, r is the coupon rate of the bond, n is the term of the bond, n is the repayment period and r is the profit of the buyer. Then the main factors that affect the bond price are the waiting period, coupon rate and the rate of return at the time of transfer.

1. Repayment period. The shorter the bond's waiting period, the closer the bond's price is to its final value (exchange price) m (1+rn), so the longer the bond's waiting period, the lower its price. In addition, the longer the repayment period, the greater the risks that the bond issuing enterprise will suffer, so the lower the bond price.

2. coupon rate. The coupon rate of bonds is also the nominal interest rate of bonds. The higher the nominal interest rate of bonds, the greater the due income, so the higher the selling price of bonds.

3. Investors' profit expectations. The profit expectation (return on investment R) of bond investors changes with the market interest rate. If the market interest rate is high, the investor's profit expectation R will also rise and the bond price will fall. If the market interest rate is lowered, the price of bonds will rise. This is most obvious when bonds are issued.

Generally, there is a gap between the printing of bonds and the issuance. If the market interest rate changes at this time, that is, the nominal interest rate of bonds will be different from the actual interest rate of the market. At this time, it is impossible to readjust the printed coupon interest. In order to make the bond interest rate consistent with the current interest rate in the market, it is only a bond premium or at discount.

4. the credit standing of the enterprise. If the issuer has a high degree of credit, the risk of its bonds is small, so its price is high; And if the credit rating is low, the bond price is low. Therefore, in the bond market, for other bonds with the same conditions, the price of national debt is generally higher than that of financial bonds, and the price of financial bonds is generally higher than that of corporate bonds.

5. the relationship between supply and demand. The market price of bonds also depends on the relationship between capital and bond supply. When the economic development is on the rise, enterprises generally need to increase investment in equipment, so on the one hand, they throw out bonds because they are in urgent need of funds, on the other hand, they will borrow money from financial institutions or issue corporate bonds, which will tighten the market funds and increase the supply of bonds, thus causing bond prices to fall.

When the economy is depressed, the demand for capital of production enterprises will decrease, and financial institutions will have surplus funds due to the reduction of loans, thus increasing the investment in bonds and causing the price of bonds to rise. When the central bank, the financial department and the foreign exchange management department carry out macro-control on the economy, it often causes changes in the supply of market funds, which generally reflects the changes in interest rates and exchange rates, thus causing the rise and fall of bond prices.

6. Price fluctuation. When the price rises at a brisk pace or the inflation rate is high, people will generally invest their funds in real estate, gold, foreign exchange and other fields that can preserve their value for the sake of maintaining their value, which will lead to the shortage of funds and the decline of bond prices.

7. Political factors. Politics is a concentrated reflection of economy, and it reacts to economic development. When people think that the change of political form will affect the economic development, for example, when the government changes, the country's economic policy and planning will change greatly, thus prompting bondholders to make buying and selling policies.

8. Speculative factors. In bond trading, people always try their best to earn the price difference, and some powerful institutions will use their funds or bonds for technical operations, such as raising or suppressing bond prices, which will cause changes in bond prices.