Bond Technicals

Question 1

What is a bond?

Answer 1

A bond is a financial instrument that represents a loan made by an investor to a borrower (typically corporate or governmental)

Question 2

What is a bond yield?

Answer 2

The return that the bond generates

Question 3

How you earn money from bond?

Answer 3

When the bond reaches its maturity, the principal is returned to the investor. Receives interest payments annuanlly - called a coupon

Question 4

Factors impacting bond yield

Answer 4

Economic growth, inflation, interest rates

Question 5

How does economic growth impact bond?

Answer 5

Economic growth, typically measured by a rising GDP, is bullish for corporations as it leads to increased revenues and profits for companies, making it easier for them to borrow money and service debt

Question 6

Inflation on bond

Answer 6

s things become more pricey the ability to pay for them rises, and so credit risk increases

Question 7

Interest rate on bond

Answer 7

If prevailing interest rates increase above the bond’s coupon rate, the bond becomes less attractive. In this situation, the bond price drops to compensate for the less attractive yield. Conversely, if the prevailing interest rate drops below the bond’s coupon rate, the price of the bond goes up as it becomes more attractive.

Question 8

Why emerging market debt?

Answer 8

developing countries have a tendency to grow rapidly (such as Indonesia), which is one of the reasons why emerging debt can offer attractive returns due to the confidence that foreign investors have in these countries’ long-term stability. useful source of risk diversification. JP. Development Finance Institution