What impact does the reduction of deposit interest rate have on bond funds?
On the one hand, lower interest rates may make bond funds appreciate. Bond funds mainly invest in bonds, and the coupon rate of bonds is fixed. Therefore, when the deposit interest rate drops, the bond interest rate will appear relatively high, which will increase the demand in the bond market and lead to the increase in bond prices. As a tool for investing in bonds, the bond fund's rising bond price in its portfolio will be reflected in the rising fund net value, thus bringing more benefits to investors.
On the other hand, after the deposit interest rate falls, the interest rate of bank wealth management bonds may fall, and bank wealth management bonds are an important part of the bond market, and the decline in their interest rates will also lead to the decline in the income of some bond funds. Moreover, after the deposit interest rate falls, the interest cost of banks will decrease, so there will be room for the loan interest rate to fall. If the interest rate of bank loans falls, the cost of financing from banks will fall, which may reduce financing through issuing bonds.
Is the central bank's interest rate cut beneficial to bond funds?
The central bank's interest rate cut is beneficial to bond funds, because when the interest rate of bank deposits drops after the interest rate cut, some users will think that the interest rate is too low and will want to invest in high-yield wealth management, and some of the funds will flow out and some will flow to bonds. When the bond price rises, it will actually benefit to a great extent.