Quote:
Originally Posted by wayner
I find this interesting.
I always that thought that bond "funds" went up as a result of interest rates falling.
(if rates are falling, and if you need the money out of your bond, I'd like to buy your bond that you are holding that pays a higher rate than the going interest rate, ad if I expect rates to fall further, I may be willing to pay a bit more for it).
I haven't looked at new issue bonds though. For them I thought that they chased the interest rates downward, just paying a bit more than the bank account interest rates to still make them appealing.
Thoughts??
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You are correct, you will pay more for a higher rate bond.
A $1000, 6% bond in a 4% environment will cost far more than a grand . The bond fund will go up in a declining rate environment.