How do you invest in bonds and treasury notes, and can you lock-in specific interest yields or is it variabld for the duration?

Question

Title edit: *Variable.

In: 8

Answer 1

When you buy a bond and intend to hold it to maturity you will lock in whatever interest rate was the market rate at the time.

Now the current value of this bond might go up or down but if you hold until it expires, then this doesn’t matter to you (unless you use leverage, which you shouldn’t).

So say you buy a 2 year bond at 4.5% and then interest rates go higher to 5% the next day. Your bonds are worth less now (people would pay less for a bond only paying 4.5% because they can get 5% elsewhere). But you are still guaranteed that 4.5% each year for the next two years. If interest rates go down to 4%, then your bonds are worth more, but you will still only receive the 4.5% interest rate.