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In a nutshell, bonds are debt. When a company, government agency or municipal project needs money, they can issue a bond that offers the investor the opportunity to "lend" and in return receive interest on their investment. Depending on the health of the bond issuer, the bond is rated. Bonds considered to be the safest investments are rated AAA while debt issued by questionable (the potential that the bond might not be repaid) agencies receive ratings of a C or below. Low risk bonds pay a small yield while those that are high risk entice investors with a high yield. Think of it this way: If you asked for a loan and your personal credit rating was excellent, you would be offered the best lending rate. Conversely, if you were a high risk borrower with poor credit history, you would be subject to higher interest rates based on your ability (or your perceived ability) to pay it back. This is basically how the bond market works.
What else can I help you with?
Can you sell a municipal bond before maturity?
Yes, you can sell a municipal bond before its maturity date. Bonds are typically traded in the secondary market, where investors can buy and sell them. However, the selling price may vary based on interest rate changes, credit quality, and overall market conditions, which could result in a gain or loss compared to the original purchase price.
What is meant by exit yield on a bond?
Exit yield on a bond refers to the yield an investor expects to receive if they sell the bond before maturity. It reflects the bond's market value at the time of sale, taking into account current interest rates and the bond's credit quality. Essentially, it helps investors assess the potential return on their investment based on prevailing market conditions rather than the bond's original coupon rate. A higher exit yield typically indicates a lower market price for the bond, while a lower exit yield suggests a higher market price.
Comment on the statement The bond market is primarily an OTC market?
Yes, because bonds are not listed on an exchange but rather priced and sold between dealers and traders. They are not regulated like the listings on exchanges. The bond market is very archaic. You can't get a quote for a bond on any of the major exchanges. If you want to sell a bond, your broker shops around for a buyer, making up to 2 or 3 phone calls to get a bid offer.
Bonds usually sell at a premium when?
when interest rates in the general market fall. This makes the interest rate on the bond relatively more attractive.
What is the convertible bond arbitrage strategy and how can it be effectively implemented in the current market conditions?
Convertible bond arbitrage is a trading strategy where investors buy a convertible bond and simultaneously short sell the underlying stock to profit from discrepancies in pricing. This strategy can be effectively implemented in the current market conditions by carefully analyzing the convertible bond's terms, the issuer's financial health, and market trends to identify opportunities for profit. Additionally, monitoring interest rates, volatility, and overall market sentiment can help investors optimize their returns through convertible bond arbitrage.
What is the corporate bond market?
The bond market (also known as the credit, or fixed income market) is a financial market where participants can issue new debt, known as the primary market, or buy and sell debt securities, known as the Secondary market, usually in the form of bonds.
When you buy a bond the issuer will owe you the full amount of the bond regardless of when you choose to cash it in?
When you buy a bond, the issuer agrees to repay you the full face value of the bond when it matures. If you choose to sell the bond before maturity, the issuer is not involved in that transaction - you would sell it on the secondary market to another investor.
How can FED purchase bond while others are holding it..Shouldn't bond holders have the right to decide whether to sell their bonds or not?
The FED doesn't force people to sell, it just buys from willing sellers in the market.
What is the difference between a primary and a secondary market?
A primary market is the main market to which you are selling.A secondary market is an additional market to which you are selling.AnswerA primary offering, such as with a corporate bond, means you are buying it directly from the issuer, at par value, usually. A secondary market is where you sell or buy existing issues. I.E. If you bought a bond last year, now need to get your principal, you can sell it in the secondary market. You may not get par value. If rates are up since you bought the bond, then you will likely have to sell it at a discount to be able to get rid of it. If rates have fallen since you bought it, you could get a premium for it..
What is market rate of bond?
Market rate of bond is that rate at which that bond will be sale in market and it is different from face value of bond as well as book value of bond.
A company that wanted to increase its capital through equity financing would most likely get involved in which market?
bond market my fellow peeps
Can you sell a municipal bond before maturity?
Yes, you can sell a municipal bond before its maturity date. Bonds are typically traded in the secondary market, where investors can buy and sell them. However, the selling price may vary based on interest rate changes, credit quality, and overall market conditions, which could result in a gain or loss compared to the original purchase price.
What is meant by exit yield on a bond?
Exit yield on a bond refers to the yield an investor expects to receive if they sell the bond before maturity. It reflects the bond's market value at the time of sale, taking into account current interest rates and the bond's credit quality. Essentially, it helps investors assess the potential return on their investment based on prevailing market conditions rather than the bond's original coupon rate. A higher exit yield typically indicates a lower market price for the bond, while a lower exit yield suggests a higher market price.
Comment on the statement The bond market is primarily an OTC market?
Yes, because bonds are not listed on an exchange but rather priced and sold between dealers and traders. They are not regulated like the listings on exchanges. The bond market is very archaic. You can't get a quote for a bond on any of the major exchanges. If you want to sell a bond, your broker shops around for a buyer, making up to 2 or 3 phone calls to get a bid offer.
When market interest rates exceed a bond's coupon rate the bond will?
When market interest rates exceed a bond's coupon rate, the bond will:
Bonds usually sell at a premium when?
when interest rates in the general market fall. This makes the interest rate on the bond relatively more attractive.
What is the convertible bond arbitrage strategy and how can it be effectively implemented in the current market conditions?
Convertible bond arbitrage is a trading strategy where investors buy a convertible bond and simultaneously short sell the underlying stock to profit from discrepancies in pricing. This strategy can be effectively implemented in the current market conditions by carefully analyzing the convertible bond's terms, the issuer's financial health, and market trends to identify opportunities for profit. Additionally, monitoring interest rates, volatility, and overall market sentiment can help investors optimize their returns through convertible bond arbitrage.
