The risk for bond investors is that the first wave of sellers will cause a 2nd wave of sellers, leaving the 3rd wave with portfolio losses.
If joy at higher growth or fear of inflation do not justify higher bond yields, is there not a risk that the bond market might cause the recovery to stall?
If anything, the risk neutral yield on the bond will be greater than warranted by the actual riskiness of the bond, due to market risk aversion.
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In that context, the risk of a bond market collapse akin to 1994 is not immaterial.
Part of their concern is tied to the explosion in the high-risk or junk bond market.
The announcement led to a 17-month low on Japanese corporate bond risk, and Japanese stocks rallied on the news.
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There are strategies that can be used without exposing yourself to significantly more credit risk (the risk of a bond issuer defaulting).
There is no way to eliminate risk from a bond portfolio without settling for the puny 1.7% yield available on Treasury bills.
Market transparency demands that a buyer in due course be made aware of what would otherwise be a hidden risk in a bond.
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Individual investors can quantify their bond portfolios risk by knowing what their duration is.
Prepayment risk is the risk that a given bond issue will be paid off earlier than expected, normally through a call provision.
When you provide this much discretion to a single manager, when you talk about that wide range, that wide band on duration, the ability to go long and short across the different macro factors, you can introduce some risk into the portfolio, not withstanding your risk target of a bond like volatility.
The emerging markets bond, with its risk premium, is up 3.39% and the US Treasury bond fund is up 0.54%.
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One of the best ways to judge risk appetite is in the bond market.
And the longer such a default went on, the greater the risk of provoking a genuine bond crisis would become.
They are right up to a point: investors carry less currency risk if some of a bond's return is denominated in domestic currency.
The risk right now is that bond insurance firms will get downgraded by the major credit agencies, which means the bonds they insure will be worth less.
As lawmakers wrangled over budget cuts, tax increases and fiscal ideology in the third quarter of last year, businesses pulled back from merger activity and the financing of risk taking through stock and bond issuance.
If I can open a frozen yogurt stand for 10, 000 dollars and get a 10% rate of return, then I will prefer the yogurt stand investment to a bond of similar risk which is offering 6%.
This is done by extrapolating a company's earnings out five years, then weighing its expected earnings and dividend streams against its historical stock price volatility (reflecting risk) and the AAA bond yield (reflecting opportunity cost).
But the market is saying that they've learned a little about controlling bond inventories and margin risk.
Bond managers assess debt risk by performing discovery on what is the sustainable gross domestic growth for the country compared to its debt.
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With other bond funds, investors risk getting back a lot less than their original cost if interest rates rise, because that pushes bonds' market prices down.
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Another way to keep your risk low is to invest in bond funds that have average maturities of 5 years or less because they seesaw around less violently as interest rates move.
Others must weigh the costs of slower growth against the benefits of greater prudence, particularly the reduced risk of a sudden jump in bond yields and the prospect of lower public debt later.
Bond investors have become choosier about sovereign credit risk, so some euro-area borrowers have had to stump up higher coupons for their recent bond issues.
As default risk is the primary driver of high-yield corporate bond prices, as opposed to interest rate direction, when the economy expands, the risk of high-yield corporate bonds defaulting is reduced and this is reflected in lower volatility.
It means that like stock funds, bond funds also have some risk associated with them.
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