High coupon vs low coupon bond


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But lo and behold, rates have changed! Both portfolio managers were correct in thinking that rates would rise. Quite a move in 12 months. The first portfolio manager, the one that bought bond A, has a The second portfolio manager, the one that bought bond B, has a Her client is happy that the bond portfolio is less volatile and her client is very happy that her portfolio outperformed portfolios of discount bonds. That portfolio manager is praised by her boss and thanked by her clients.


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By buying a discount bond bond A , the first portfolio manager underperformed the second by 1. He decides he needs to learn more about bonds. Most portfolios are diversified between stocks and bonds.

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Some portfolios may be heavily weighted towards bonds, especially for older or more conservative clients. Does your portfolio manager know bonds? Reach out to us. We have extensive knowledge and experience with bonds and would welcome your thoughts.

Save my name, email, and website in this browser for the next time I comment. Invest Smart. Live Well. Home Questions Tags Users Unanswered. Why bonds with lower coupon rates have higher interest rate risk?

What’s the Difference Between Premium Bonds and Discount Bonds?

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According to the following article : Bonds offering lower coupon rates generally will have higher interest rate risk than similar bonds that offer higher coupon rates. Why the price of the bond 1 should fall more? Dheer Ignorant Ignorant 1 1 gold badge 3 3 silver badges 14 14 bronze badges.

Yield to maturity - Wikipedia

Please re-read what you wrote for values the bonds will drop. JoeTaxpayer I went to the investing answers Yield To Maturity calculator and tried some different inputs. You got it. The new numbers are good, and hopefully OP understands the math behind the numbers.

No harm done! I've read some answers the next day, and vowed never to "drink and answer" again I'll revisit, and if Zeta hasn't updated, I can edit. Either way, I'll clean up these comments. Sign up or log in Sign up using Google.

Understanding the Risks of Corporate Bonds

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