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re: Buying bonds in laymans terms
Posted on 12/5/12 at 12:12 pm to LSURussian
Posted on 12/5/12 at 12:12 pm to LSURussian
quote:
Credit risk? No.
Interest rate risk? Yes...a bunch. Even with a duration of 3.4 you could see an entire year's worth of income wiped out in a loss of market value if rates spike up at all.
Ditto. You could also see the value of the bond possibly fall to 80 cents on the dollar or worse if it's a considerable spike
Posted on 12/5/12 at 3:40 pm to Broke
quote:That would take an interest rate increase in the range of 5% annually with a duration of 3.4. So, 10 year bond rates would have to go from their current 1.6% to nearly 6.5%+ in a short period of time. which is not likely anytime soon.
You could also see the value of the bond possibly fall to 80 cents on the dollar or worse if it's a considerable spike
'Not likely,' but I'm old enough to not rule out anything these days, especially if the morons ('morans' for you Rant & O-T Lounge readers) in congress don't accomplish something soon on the deficits.
This post was edited on 12/5/12 at 4:14 pm
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