Bonds are securities issued by the government or enterprises, which is equivalent to borrowing money from social financing with an IOU, and then repaying the principal and interest within a certain period of time. Bonds have always been an investment product that institutions like to hold very much, while retail investors don't like to hold bonds very much. Professional investors, like fund managers, generally allocate bonds to their own funds to reduce the risk of the stock market. There are three kinds of bonds in the market: interest rate bonds, credit bonds and convertible bonds.

Interest rate bond: generally refers to bonds issued by the government, such as national debt and local government bonds. These bonds have a high credit rating.

Credit bonds: refers to bonds issued by entities other than the government, generally bonds issued by enterprises and companies. Compared with interest rate bonds, the credit rating of these bonds is not so high, and the market will give a risk premium, so the coupon rate of these bonds is higher than that of interest rate bonds.

Convertible bonds: Convertible bonds are all bonds issued by listed companies, and the interest of these bonds is very low, so enterprises will issue such bonds for low-cost financing. The advantage of this bond for investors is that it can be converted into company shares. It is equivalent to half of the bond property and half of the stock property.

Let me start with the investment logic of the bond market. Bonds are also influenced by economic cycle and monetary policy. We should invest in bonds when interest rates start to fall from a high point. Merrill Lynch clock divides the economy into four cycles, in which the economy rotates repeatedly, namely stagflation period, recession period, recovery period and overheating period. We should invest and hold bonds during the recession, because at this time, when the economy is in recession and the stock market is not optimistic, the central bank will start to loosen the monetary policy and lower the market interest rate. Then why do bond prices rise when interest rates fall? Bonds can be traded, just like stocks, but the fluctuation is not as big as stocks. Bonds are divided into long-term bonds, medium-term bonds and short-term bonds according to the investment period. When interest rates rise sharply, buying bonds may lead to losses. For example, when the yield of 10-year treasury bonds is 2.5%, the yield of 10-year treasury bonds rises to 5% or the yield of 5-year treasury bonds rises to 2.5% due to the rise of economic interest rates. At this point, investors will sell old bonds and buy new bonds or bonds with shorter maturities, so that the due repayment of principal and interest will be higher or the liquidity will be better. In this way, the price of the old bonds originally bought will fall, resulting in losses, which generally occurs in the stagflation period. On the other hand, when the yield of 10 treasury bonds is 5%, the central bank keeps cutting interest rates and reducing the yield to 2.5%, so investors will be willing to buy old bonds instead of new ones, which will push up the price of old bonds, leading to a bull market in bonds and a general recession in bonds. (The above yield of national debt is just an analogy, which should not be followed in actual operation. Therefore, interest rates open a bear market for rising cyclical bonds, and interest rates open a bull market for falling cyclical bonds.

So how do you determine whether bonds enter a bull market? Interest rates have peaked and may not fall immediately, because the central bank's response is not so fast, and it will not immediately reduce RRR and cut interest rates. Although the central bank will no longer raise interest rates, the high interest rate environment will cause a credit crunch, which is still lethal to bonds. Bonds do not need to be laid out in advance. When the interest rate goes down, it is not too late to reinvest in the bond bull market. It's not like the stock market can fly at once. Usually take the money fund as a reference, bonds are more attractive than money funds, and then they will return to bonds. In the high interest rate environment, the income of the money fund is also around 7%, and there is no need to lay out bonds in advance. From the second half of 20 18, it is a bull market for bonds. At that time, the central bank began to reduce RRR and cut interest rates in the trade war, and now it has a good return. In addition, you cannot hold a single credit bond. It is best to disperse at least 10 or directly hold bond funds, otherwise the bond storm will not only lose interest, but also lose the principal. Interest rate bonds basically do not have this risk, because they are all government bonds.

So when do you start to withdraw from the bond market? We should gradually reduce the investment in bonds between the recovery period and the overheating period, completely empty them before the interest rate rises, gradually switch from long-term bonds to short-term bonds or directly hold money funds, and then start to lay out bonds after the interest rate begins to fall.