when do bond prices change?

[fmjvertigo123]

hey guys, am i right in thinking that bonds offer a better percentage return, when at the bottom of the business cycle, because it needs money to reboost the company?
i suppose despearte companys offer better returns right?
what would you say is the average percentage return on bonds?

sorry for all the questions

 

[Rhody Trader]

Actually, at the bottom of the business cycle bonds are usually an under-performer because rates are generally low (low demand for borrowing and central bank action).

 

[fmjvertigo123]

ok, so your saying they'd rather get bank loans, than issue bonds at the bottom of the business cycle? does that mean in general, bonds offer a better return at the peak?

 

[Rhody Trader]

It has nothing to do with bank vs. bond. It has to do with companies not interested in borrowing - low credit demand. Bonds do tend to perform better from the peak of a cycle in terms of total return because that's usually the interest rate peak.

 

[fmjvertigo123]

why would they do better when interest rates are at its peak? if you dont mind me asking rhody

 

[intradaybill]

why would they do better when interest rates are at its peak? if you dont mind me asking rhody

The price of bonds is inversely related to interest rates. Rates go up, prices go down. When interest rates are at a peak, bonds are cheap. Now bonds are expensive, still.

 

[Rhody Trader]

Because you lock in a high coupon yield and the price of the bond will rise as market rates fall, so you'll get a capital gains kicker as well. It's the reverse at the other end of the cycle.

 

[joyHanes]

You should always consider that before selecting a maturity date for a bond consider when you will need your principal. There are times that if you sell before the bond matures, interest rate and credit rating changes will affect the selling price.

 

[Jessiee]

I think at this modern era bonds are out of date financial tools to make investment .you should check out the market situation and if you have the favorable situation then i suggest you can have a try but don't invest too much it in.

 

[Rhody Trader]

I think at this modern era bonds are out of date financial tools to make investment .

Bonds, like stocks, serve a purpose in a portfolio. They are not out of date, though they may not be as favored in the current environment as they have been in the past.

 

[bobby8971]

It's better selling it before mature.

 

[Rhody Trader]

It's better selling it before mature.

Why? Selling may incur a transaction cost.