I am very confused because I thought if interest rates go up, that means bonds now become valuable? What makes a bonds index fund like BND go down? Arent bonds just loans against the government or corporations? Shouldnt that be a good thing all the time? Shouldnt a ticker like BND always be green?? I am so confused!! Thank you in advance for reading and answering my stupid question lol
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A decrease in interest rates makes the value of bonds that have already been issued (with a higher interest rate) increase in value.
If I buy a 10 year bond at 10% and then interest rates drop to 5%, I can sell my bond to someone else for more than the government does because in 10 years my bond will be worth more than a new bond issued at 5%
By selling it early, I get an instant return on my investment, and the buyer gets a better return on investment than they could get from the government.
You also need to consider how long the bonds have left until they mature as well as what other interest rates are available, for the particular price you should pay for a particular bond. It’s a bit complex for an ELI5
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