Re: Interesting Bond issues
bro, can explain flow of bond prices daily to me? is there some kind of weird logic behind??
besides the inverse corelation between yield and bond prices...
Dear Leader, you mean, factors affecting bond prices? Yes, there are many factors affect the demand = price movement of bonds.
1. Macro-environment interest rates/inflation
Textbook: market rates higher = your bond price drops
Current: Market is worrying about something; bond demand/prices went up so much that they supercede the downward pressure on bond prices despite projecting 2015 US rate hike.
2. Issuer risk
Commonly know as credit rating or credit worthiness. If OCBC and a penny stock gives you 5%, i think you will prefer OCBC.
3. Currency
Depending on market perception, the price of a USD 5% bond is likely to be different from a SGD 5% bond from the same company, ceteris paribus
4. Listing market
A retail market bond
usually commands higher premium/price than a secondary market bond from the same company, ceteris paribus
5. Denominations
Very often, bonds (from the same company) listed in smaller denominations are more expensive = lower yields than similar bonds from the same company, ceteris paribus. Retail market $100 or $1000, secondary market $250000.
6. Stock Market
Textbook: Shares up = Bond down (More applicable for govt bonds)
Current: RUN notices that it is not always true. If market meltdown, corporate bonds will also drop (by a smaller magnitude. Eg. UOB, OCBC preference shares were trading at 5-10% discount to par when their ordinary shares collapsed by 30-40% after the subprime crisis.
7. Bond Duration
Textbook: Longer duration = more risky = lower bond price for same yield
Current: If market perceives low-interest rates environment to persist, please don't be surprise that the reverse is true = higher bond premium for bonds from SAFE ISSUERS because buyers wanna lock-in or enjoy the good bond-yields for longer time frame.
..............still got other factors that i might overlook =)