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How Interest Rate Changes Affect the Price of Bonds

How Interest Rate Changes Affect The Price Of Bonds Splash image

Whether the interest rate movements are caused by Federal Reserve actions, economic conditions or inflation fears, the impact on the bond investor is the same: Rising interest rates reduce existing bond values and falling interest rates increase existing bond values.

Seems simple enough.

But how will your bond investments be affected by changes in interest rates?

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Discussion

Jim from Illinois posted over 2 years ago:

DO THE DIVIDEND $$$ INCREASE WHEN LONG TERM
BOND FUNDS FALL IN PRICE


Charles from Illinois posted over 2 years ago:

Jim, most bonds pay a fixed amount of interest, so the interest payments you receive aren't affected by the bond price. Yield, which calculates the interest payment in relation to the bond's price, does change, but not the actual interest payment made. -Charles Rotblut, AAII


Edward from Virginia posted over 2 years ago:

when interest rate start to rise:
How safe are the following:
Gnma bond funds
inflation- protected bonds in a bond fund
total bond market index fund





Ron Scheurer from Ohio posted 5 months ago:

Hey Edward or others,

My experience with GNMA funds is that they are coupon clippers and don't move much with interest rate changes.
Also you need a point of reference when buying bond funds. The statement to avoid zero coupon bonds is not always true. Bought some in the mid 70's yielding 12% to maturity and that turned into a great investment.
As for tips and index bond funds you want to acquire when they are discounted and not pay a premium.


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