vania-janet/multiturn-rag-retrieval-data huggingface dataset:
I'll get to my answer in a moment, but first need to put focus on the two key components of bond prices: interest rates and credit risk. Suppose that the 10-year treasury has a coupon of 2% per year (it would be paid as 1% twice per year, in reality). If you own one contract of the bond which we suppose has a so-called face-value of $100, then this contract will over the ten years pay you a total of $20 in coupons, then $100 at redemption. So $120 in total. Would you therefore buy this 10-year treasury bond for $120, or more, or less? Well, if there were bank accounts around which were offering you an interest rate of 2% per year fixed for the next 10 years, then you could alternatively generate $120 from just $100 deposited now (if we assume that the interest paid is not put back in the account to earn 2% per year). Consequently, a price of $100 for the treasury would seem about right. However, suppose that you are not very confident that the banks that offer these accounts will even be around in 10 years time, maybe they will fail before that and you'll never get your money back. Then you might say to yourself that the above calculation is mathematically right, but not really a full representation of the different risks. And you conclude that maybe treasuries should be a bit more expensive, because they offer better credit risk than bank deposits. All of this just to show that the price of bonds is a comparative valuation of rates and credit: you need to know the general level of interest rates available in other investment products (even in stocks, I'd say), you need to have a feel for how much credit risk there is in the different investment products. Most people think that 'normally' interest rates are positive, because we are so familiar with the basic principle that: if I lend you some money then you need to pay me some interest. But in a world where everyone is worried about bank failures, people might prefer to effectively 'deposit' our savings with the US treasury (by buying their bonds) than to deposit their savings in the local bank. The US treasury will see this extra demand and put up the prices of their bonds (they are not stupid at the US treasury, you know!)
"The most fundamental observation of bond pricing is this: Bond price is inversely proportional to bond yields  When bond yields rise, the price of the bond falls.  When bond yields fall, the price of the bond rises.  Higher rates are ""bad"" for bonds. If a selloff occurs in the Russian government bond space (i.e. prices are going down), the yield on that bond is going to increase as a consequence."
"The name of the Gilt states the redemption date, but not the original issue date. A gilt with 8.75% yield and close to its redemption date may have been issued at a time when interest rates were indeed close to 8.75%. For example in the early 1990s, the UK inflation rate was about 8%. One reason for preferring high or low coupon gilts is the trade off between capital gains and income, and the different taxation rules for each. If you buy a gilt and hold it to its maturity date, you know in advance the exact price that it will be redeemed for (i.e. £100). You may prefer to take a high level of income now, knowing you will make a capital loss in future (which might offset some other predictable capital gain for tax purposes) or you may prefer not to take income that you don't need right now, and instead get a guaranteed capital gain in future (for example, when you plan to retire from work). Also, you can use the change in the market value of gilts as a gamble or a hedge against your expectation of interest rate changes in future, with the ""government guaranteed"" fallback position that if your predictions are wrong, you know exactly what return you will get if you hold the gilts to maturity. The same idea applies to other bond investments - but without the government guarantee, of course."
"Can you give the context? A bond usually only has one ""tenor,"" so weighted average tenor could apply to all the bonds that a single firm owes? Or an industry or the market or a specific bond rating or whatever. But we usually use duration as it's more useful"
When you buy a bond - you're giving a loan to the issuer. The interest rate on the bond is the interest rate on the loan. Usually (and this is also the case with the treasury bonds), the rate is fixed for the term of the loan. Thus, if the market rate for similar loans a year later is higher, the rate for the loan you gave - remains the same.
So when someone sells a bond in the middle of its term, the only things that can change are the price and corresponding yield/discount rate. Other commenters… including you… have touched on some of the reasons why the prices go up and down. Generally speaking, it’s because of the basics of supply and demand… higher level of bonds for sale to be purchased by same level of demand will mean prices go down. But it’s not ‘just because interest rates are going up and down’. It has a lot more to do with the expectations for 1) risk, 2) return and 3) future inflation. Sometimes it is action by the Fed, as Joe Taxpayer has pointed out. If they sell a lot of bonds, then the basics of higher supply for a set level of demand imply that the prices should go down. Prices going down on a bond imply that yields will go up. (I really hope that’s clear by now). This is a common monetary lever that the government uses to ‘remove money’ from the system, in that they receive payments from an investor up front when the investor buys the bond from the Fed, and then the Fed gradually return that cash back into the system over time. Sometimes it is due to uncertainty about the future. If investors at large believe that inflation is coming, then bonds become a less attractive investment, as the dollars received for future payments will be less valuable. This could lead to a sell-off in the bond markets, because investors want to cash out their bonds and transfer that capital to something that will preserve their value under inflation. Here again an increase in supply of bonds for sale will lead to decreased prices and higher yields. At the end of the day it is really hard to predict exactly which direction bond markets will be moving, and more importantly WHY. If you figure it out, move to New York or Chicago or London and work as a trader in the bond markets. You’ll make a killing, and if you’d like I will be glad to drive your cars for you. 4. How does the availability of money supply for banks drive changes in other lending rates? When any investment organization forms, it builds its portfolio to try to deliver a set return at the lowest risk possible.
Public Securities Association Standard Prepayment Model is what the acronym psa stands for.  My understanding is that it allows for adjustments in monthly pre-payment amounts, which will then affect the yield of the bond.  Not really sure what the most important bond measure would be... but if I had to guess I'd say its the mechanical bond price/ bond yield relationship.  Yields go down, prices go up and vice versa.
Imagine a $1,000 face value bond paying 10% interest semi-annually. That means every 6 months there is $50 being paid. Now, if the price of that bond doubled to $2,000, what is the yield? It is still paying $50 every 6 months but now sports a 5% yield as the price went up a great deal. Similarly, if the price of the bond was cut in half to $500, now it is yielding 20% because it is still paying out the $50 every 6 months. The dollar figure is fixed. What percentage of the price it is can vary and that is why there is the inverse relationship between prices and yields. Note that the length of the bond isn't mentioned here where while usually longer bonds will have higher yields, there can be inverted yield curves as well as calls on some bonds. Also, inflation-indexed and convertible bonds could have different calculations used as principal adjustments or possible conversion to stock can change a perception on the overall return.
But the notes are always called at par, no? So you have a fixed yield which depends on the coupon and price you bought it at. I still don't see how the company doing better than expected changes the yield on your investment.
No citation, but I once read the average holding period of a 30 yr treasury is 8 hours. A rise in the rate by just .1% will drop the value by just under 2% wiping out nearly a full year's gains. With 29 years to go the value of the 3% bond will be worth $981 if the rate were then 3.1% It's at 3.16% the bond would drop to exactly $970 after the year, i.e. you've gotten no return at all.  I view this as pretty high risk.
If you worked through the math for a 6% discount rate on an 8% coupon bond, you would see that it’s “premium”, because you would pay more than the principal that is returned to obtain the bond [10,842.87 vs 10,000]. Similarly, if you work through the math for a 10% discount rate on an 8% coupon bond, it’s a ‘discount’ bond because you will pay less than the principal that is returned for the bond [9,241.84 vs 10,000]. It’s easy to see how an investor could hold our imaginary Dell bond for one year, collect the first interest payment, and then sell the bond on to another investor. The mechanics of the calculations are the same, except that one less interest payment is available, and the principal will be returned one year sooner… so N=4 in both formulae. Still with me? Now that we’re on the same page about how a bond is priced, we can talk about “Yield To Maturity”, which is at the heart of your main question. Bond “yields” like the ones you can access on CNBC or Yahoo!Finance or wherever you may be looking are actually taking the reverse approach to this. In these cases the prices are ‘fixed’ in that the sellers have listed the bonds for sale, and specified the price. Since the coupon values are fixed already by whatever organization issued the bond, the rate of return can be imputed from those values. To do that, you just do a bit of algebra and swap “present value” and “future value” in our two equations. Let’s say that Dell has gone private, had an awesome year, and figured out how to make robot unicorns that do wonderful things for all mankind. You decide that now would be a great time to sell your bond after holding it for one year… and collecting that $800 interest payment. You think you’d like to sell it for $10,500. (Since the principal return is fixed (+10,000); the number of periods is fixed (4); and the interest payments are fixed ($800); but you’ve changed the price... something else has to adjust and that is the discount rate.)
"What is a bond price? A bond is an asset, and like any tradeable asset it has a price. If I hold $10K face value of a certain GM bond, then I would be willing to sell it at some price, which may be more or less than $10K. Whoever is willing to sell it for the lowest amount determines the price. The price is determined by the market, just as all prices are. It's what you can sell a bond for. Bond prices may be quoted in various funny ways, like as a discount or premium relative to the face value or as a premium over a treasury, but at the end it all should be converted to how much you have to pay today. In this case, it's how much you would pay today to get a set of future coupon and principal payments. What is Yield to Maturity? A bond is a contract entitling you to a certain set of predefined cash flows. If you take that set of cash flows and discount them using a single rate at all maturities such that the discounted value is equal to the price, the single rate you have identified is the YTM. Mathematically, this is the same as finding the IRR (internal rate of return) of some set of cash flows. In this case the cash flows are the coupons and principal repayment. Other bond concepts. Note that the other aspects of a bond, like maturity, coupon rate, and face value, are immutably written into the bond contract. All they do is define what payments the bond entitles the owner to. They don't say how much someone would pay today in order to be entitled to those payments. One can't know how much a future payment is worth without discounting. If you know the appropriate discount rate at every relevant maturity, you could calculate the fair price of a bond. That's the other direction. YTM looks at the market price and associated cash flows and imputes what single discount rate would make that price fair. What is YTM good for? Recall what I said about IRR above. Why would anyone want to know what discount rate equates the cash flows of a project to its cost?
Based on the formula above, I calculated a YTM of .314% for the first bond if you bought on Sept 7, 2012 (and thus missed the upcoming coupon payment). Buying today, you'd also be entitled to about 5 weeks' worth of the coupon payment that is due on Sept 07 2012, which is close enough to the present day that the discounted value is a rounding error, putting the YTM of the bond right at .40%. This is the rate of return you'll get off of your investment if you are able to take all the returns from it, when you receive them, and reinvest them at a similar rate (similar to having a savings account at that rate, or being able to buy fractional shares of a mutual fund giving you that rate)."
The debt part: http://www.brillig.com/debt_clock/ (ie closing in on $18T)  The bond part:  MBS - http://research.stlouisfed.org/fred2/series/MBST  Tres - http://research.stlouisfed.org/fred2/series/TREAST  Note: Sorry I was off by a trillion dollars - FED holds $5T and growing fast. So easy to be off by a trillion these days. Please forgive me.  edit: format and grammar
"What exactly is ""Call Protection""? Is ""NO"" normal for a CD?   A ""callable"" cd (or one without protection can be revoked before maturity by the issuer. For example, if interest rates drop they might recall the CD since they can borrow money at a lower rate. A callable CD should offer a better return in exchange for this. Is ""first coupon date"" the first time it actually pays interest?   Yes. Given that the first coupon date is in 6 months, and it's semiannual, is it fair to assume that this pays every six months?   Yes Given that the maturity date is 9/29/2025, this is really a 15-year CD, right?   It depends. CDs can be resold on the market. So it is AT LEAST a 15 year CD. It could also be a 20 year CD originally issued in 2005. What does ""Price (Ask)"" mean? It says 100 - does that mean you buy in chunks of $100?   Yes. More accurately, they are $100 per CD.  What is ""Yield to Worst (Ask)""? Is this the worst yield that this CD will return?   The lowest potential yield that can be received on a bond without the issuer actually defaulting. 3.25% is the best yield I've seen from something as stable as a CD. Would it be silly, though, to lock money up in an investment like this for 15 years?     There is no way to really say without a crystal ball. If you aren't willing to accept more risk and think that interest rates will remain at these historic lows for a long while, then it is probably a good deal. If you think interest rates are due to go up substantially, then it is probably smarter to ladder your investments in shorter term CDs. In investment circles this is known as ""Interest Rate Risk"""
In the strictest sense, there are bills,notes, and bonds, named when issued based on their time to maturity. Even though it's called a bond ETF it may have a duration short enough to be made of T-bills, less than a year to maturity.  Simply put, for bonds, risk comes from the duration, time to maturity.
&gt; How would you value a bond?  Very basic approach is TVM.  This should have been taught in your first year accounting class.  http://en.wikipedia.org/wiki/Time_value_of_money  &gt; How do you value an option? Using the Black–Scholes options pricing model.  BS opt pricing model is one (typically the entry level for teaching option pricing) stochastic model you can use.  It has limitations due to certain assumptions made (such as constant vol) but you're correct, you can value an option with it.  &gt; How would you construct a yield curve? Draw a graph with maturity on the X-axis and yield on the Y-axis.  So that's how to draw an xy plane... yes you're correct.  That doesn't answer how to actually create a yield curve.  The most simplest approach of creating one is to bootstrap the curve using the spot and forwards.
"A bond fund will typically own a range of bonds of various durations, in your specific fund: The fund holds high-quality long-term New York municipal bonds with an   average duration of approximately 6–10 years So through this fund you get to own a range of bonds and the fund price will behave similar to you owning the bonds directly.  The fund gives you a little diversification in terms of durations and typically a bit more liquidity.  It also may continuously buy bonds over time so you get some averaging vs. just buying a bond at a given time and holding it to maturity.  This last bit is important, over long durations the bond fund may perform quite differently than owning a bond to maturity due to this ongoing refresh.  Another thing to remember is that you're paying management fees for the fund's management. As with any bond investment, the longer the duration the more sensitive the price is to change in interest rates because when interest rates change the price will track it. (i.e. compare a change of 1% for a one year duration vs. 1% yearly over 10 years) If I'm correct, why would anyone in the U.S. buy a long-term bond fund   in a market like this one, where interest rates are practically   bottomed out? That is the multi-trillion dollar question.  Bond prices today reflect what ""people"" are willing to pay for them.  Those ""people"" include the Federal Reserve which through various programs (QE, Operate Twist etc.) has been forcing the interest rates to where they want to see them.  If no one believed the Fed would be able to keep interest rates where they want them then the prices would be different but given that investors know the Fed has access to an infinite supply of money it becomes a more difficult decision to bet against that.  (aka ""Don't fight the Fed"").  My personal belief is that rates will come up but I haven't been able to translate that belief into making money ;-)  This question is very complex and has to do not only with US policies and economy but with the status of the US currency in the world and the world economy in general.  The other saying that comes to mind in this context is that the market can remain irrational (and it certainly seems to be that) longer than you can remain solvent."
what do you mean exactly?  Do you have a future target price and projected future dividend payments and you want the present value (time discounted price) of those? Edit: The DCF formula is difficult to use for stocks because the future price is unknown.  It is more applicable to fixed-income instruments like coupon bonds.  You could use it but you need to predict / speculate a future price for the stock. You are better off using the standard stock analysis stuff: Learn Stock Basics - How To Read A Stock Table/Quote The P/E ratio and the Dividend yield are the two most important.  The good P/E ratio for a mature company would be around 20.  For smaller and growing companies, a higher P/E ratio is acceptable.  The dividend yield is important because it tells you how much your shares grow even if the stock price stays unchanged for the year. HTH
It depends a lot on your investment period and the quality of the bonds that you want to invest. For example, if you want to invest until the maturity of the bonds, and the bonds are very safe (i.e. they are not expected to default), it does not matter that the interest rate rise. That is because at the maturity of the bond it will converge to its maturity value which will be independent of the change of the interest rates (although on the middle of the life the price of the bond will go down, but the coupon should remain constant -unless is a floating coupon bond-). An option could be to invest in an ETF with short term bonds (e.g. 1 year) with AAA credit rating (high quality, so very low default rate). It won't yield much, but is more than 0% if you hold it until maturity.
Article is 1 paragraph long and does not answer the question in the headline. Just states the fact that Tesla bonds are higher yield.  I was hoping to be able to read speculation as to why bond investor's are valuing them this way.
Very rarely would an investor be happy with a 4% yield independent of anything else that might happen in the future. For example, if in 3 years for some reason or other inflation explodes and 30 year bond yields go up to 15% across the board, they would be kicking themselves for having locked it up for 30 years at 4%. However, if instead of doing that the investor put their money in a 3 year bond at 3% say, they would have the opportunity to reinvest in the new rate environment, which might offer higher or lower yields. This eventually leads fixed income investors to have a bond portfolio in which they manage the average maturity of their bond portfolio to be somewhere between the two extremes of investing it all in super short term/ low yield money market rates vs. super long term bonds. As they constantly monitor and manage their maturing investments, it inevitably leads them to managing interest rate risk as they decide where to reinvest their incremental coupons by looking at the shape of the yield curve at the time and determining what kind of risk/reward tradeoffs they would have to make.
No, the interest payments you receive do not change. To help avoid confusion, it is better to call those payments the coupons of the bond. Each treasury note or bond is issued with a certain coupon that remains fixed throughout its whole life. However, as the general level of bank interest rates change maybe because the FED is moving its deposit rate for banks, the value of the treasury bond will change. At maturity it will always be worth its face value, but at any time before that its price will depend on the general level of interest rates in the country. Because of the way a bond is structured, it is usually possible to convert the bond's price into a yield, which is usually a percentage like 3% or sometwhere near the current level of general interest rates. But don't be confused, this yield is just an alternative way of stating the current price of the treasury bond, and it changes as the prices of the bond changes. It is not the coupon that is changing, but the yield.
"[...] are all bonds priced in such a way so that they all return the same amount (on average), after accounting for risk? In other words, do risk premiums ONLY compensate for the amount investors might lose? No. GE might be able to issue a bond with lower yield than, say, a company from China with no previous records of its presence in the U.S. markets. A bond price not only contains the risk of default, but also encompasses the servicability of the bond by the issuer with a specific stream of income, location of main business, any specific terms and conditions in the prospectus, e.g.callable or not, insurances against default, etc. Else for the same payoff, why would you take a higher risk? The payoff of a higher risk (not only default, but term structure, e.g. 5 years or 10 years, coupon payments) bond is more, to compensate for the extra risk it entails for the bondholder. The yield of a high risk bond will always be higher than a bond with lower risk. If you travel back in time, to 2011-2012, you would see the yields on Greek bonds were in the range of 25-30%, to reflect the high risk of a Greek default. Some hedge funds made a killing by buying Greek bonds during the eurozone crisis. If you go through the Efficient frontier theory, your argument is a counter statement to it. Same with individual bonds, or a portfolio of bonds. You always want to be compensated for the risk you take. The higher the risk, the higher the compensation, and vice versa. When investors buy the bond at this price, they are essentially buying a ""risk free"" bond [...] Logically yes, but no it isn't, and you shouldn't make that assumption."