Edscharp,
Lets first take a look at the simplest 101 aspects of bond investing.
One buys a bond with a given interest rate for a set period of time.
You hold that investment over the time duration and your principal plus interest is returned.
Two negatives:
1... Quality of the issuer -- [will your investment be returned]
2... Amount of inflation -- [what will it buy upon return]
It's That Simple
Beyond this simple exchange the subject becomes very complex.
"The gap between the yield on two-year and 10-year Treasury notes, known as the benchmark yield curve, disappeared by late December, with the yield on the 2-year note having risen above the 10-year. Known as the inversion of the curve, the phenomenon is rare in the bond market and in the past has signaled a recession."
How the large players in the bond markets use this rare event, will effect all investors in every market.
Here's the 30 year bond chart for price:
stockcharts.com[w,a]maoannay[d19900115,20061022][pf][iLb14!Lh14,3!La9,21,6][J66204233,Y]&pref=G
Here's the 30 year bond chart for yield:
stockcharts.com[w,a]maoannay[d19900115,20061022][pf][iLb14!Lh14,3!La9,21,6][J66206021,Y]&pref=G
Perhaps in todays situation, taking some risk for higher yields with short time duration is a resonable answer...?
Lets keeping adding to this discussion...
I'll look for some books.
My Best,
Chip |
