Thursday, December 17, 2009

Are bonds with low intest rate risk necessarily safer than otherwise identical bonds with lower coupons?

Interest-rate risk is determined by the length of the maturity of the bond, not the yield or coupon. That is, longer-term bonds, such as 30-year bonds, have the highest interest-rate risk: they decline the most in value as interest rates rise. Short term bonds or notes have the lowest interest-rate risk.Are bonds with low intest rate risk necessarily safer than otherwise identical bonds with lower coupons?
The interest rate or coupon doesn't have great influence on risk.





I love an optimist, you ';know'; US govt bonds will get paid?





They said the same about previous sovereign debt failures.





What happens when the BRIC and Japanese stop funding the deficit?Are bonds with low intest rate risk necessarily safer than otherwise identical bonds with lower coupons?
Basically, the safest bonds are US Govt obligations, you know those are going to get paid.

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