Bear Bond

Bond considered likely to increase in value in a bear market, i.e., when interest rates are rising. The typical bond pays the investor a stream of cash fixed in terms of the dollar amount and the dates paid, and will decline in price when rates increase. Certain bonds, for example, an Interest-Only (IO) Strip or a mortgage-backed security paying interest only, are likely to rise in value in a bear market because prepayments on the underlying mortgages slow down. This slowing in loan prepayments increases the total amount of cash the investor can expect to receive over the life of the investment.