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Vincere June 30th, 2013 10:39pm

Since the Fed announced its intentions to wrap up QE faster than most expected, markets have driven bond yields significantly higher. Without looking it up, can you guess what will happen to bond prices?

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Cruz2016 Rum Bum Beach City
06/30/13 11:12 pm

I looked up your published polls and decided to start following you. I know squat about investing so I'm hoping to learn something, don't let me down ;)

Vincere Seattle
07/01/13 1:11 am

Thanks, I'll try!

2katz I live in Nebraska
06/30/13 4:26 pm

So that's good news for the bond funds I have?

Vincere Seattle
06/30/13 4:29 pm

That depends. What interest rate did you buy them at and when do they mature?

chinito Florida
06/30/13 4:40 pm

No. The face value of the bond will decrease. You will receive the same amount of money as monthly payment. But if you sell, you will get less $. Unless you wait until maturity.

2katz I live in Nebraska
06/30/13 5:09 pm

Bond FUNDS, not individual bonds.

chinito Florida
06/30/13 5:18 pm

Depends on what bonds the fund have on it. If the fund managers where smart enough to anticipate this, it could be good news.

chinito Florida
06/30/13 5:19 pm

Do this funds pay you rent?

Vincere Seattle
06/30/13 5:27 pm

A good manager can keep duration down so the fund isn't as responsive to a change in interest rates. Most people in the business community saw this coming, so a good bond manager would have made preparations years in advance.

chinito Florida
06/30/13 5:44 pm

For a few time now the consensus was to buy bonds that will mature soon. If your Fund did this, then bonds will be paid at face value (full price). And now, they can start buying bonds at a discount price and higher yield.

Vincere Seattle
06/30/13 3:42 pm

Decrease. It's called the inverse relationship between bond yields and bond prices. For bonds, yields and prices always move in opposite directions. It's a very basic principle that many people who have bonds in their portfolio don't know.

Vincere Seattle
06/30/13 3:43 pm

But nobody change your answer. I want to see the results.