Bonds

Government bond interest is exempt from state and municipal taxes, whereas corporate bond interest is not. Bonds issued by the government have a weaker connection to stocks than corporate bonds. Historically, a classic 60/40 treasury bond portfolio has produced higher returns, lower volatility, higher risk-adjusted returns (Sharpe), and fewer drawdowns than corporate bonds. Many investors […]

When governments and enterprises need to raise funds, they issue bonds. You’re giving the issuer a loan when you buy a bond, and they pledge to pay you back the face value of the loan on a particular date, as well as periodic interest payments, usually twice a year. Bonds issued by firms, unlike stocks,

Green bonds are similar to conventional bonds in that the money raised from investors is used solely to fund projects that have a good influence on the environment, such as renewable energy and green buildings. How do green bonds function and what are they? A green bond is a type of fixed-income instrument that is

We expect 2021 to be a year of recovery for fixed income investors. Many economic estimates show the United States’ GDP growing by as much as 5% or perhaps 6%, raising the question of whether bond market yields will rise in this climate. Rising rates, on the other hand, imply lower bond prices—at least on

From the first day of the month after the issue date, an I bond earns interest on a monthly basis. Interest is compounded (added to the bond) until the bond reaches 30 years or you cash it in, whichever happens first. Interest is compounded twice a year. Interest generated in the previous six months is

The immediate impact of an increase in bond prices on interest rates is the most obvious. The interest rate on a $100 bond is 5% per year if the bond pays $5 in interest per year. If the bond price rises to $125, the annual interest rate will be merely 4%. How does the Federal

When the Fed buys bonds on the open market, it expands the economy’s money supply by exchanging bonds for cash to the general public. When the Fed sells bonds, it reduces the money supply by taking cash out of the economy and replacing it with bonds. As a result, OMO has a direct influence on

When the Fed buys bonds on the open market, it expands the economy’s money supply by exchanging bonds for cash to the general public. When the Fed sells bonds, it reduces the money supply by taking cash out of the economy and replacing it with bonds. As a result, OMO has a direct influence on

Bond sales are one way for governments and businesses to raise funds. Borrowing becomes more expensive for them when interest rates rise, resulting in higher-yielding debt issuances. At the same time, demand for existing lower-coupon bonds will decline (causing their prices to drop and yields to rise). What happens if the Federal Reserve hikes interest

Treasury bonds offer a fixed rate of interest, making them a reliable source of income. As a result, bonds can provide investors with a consistent return that can help balance the risk of losing money in other investments, such as shares. Is it possible to profit from Treasury bonds? The first option is to keep