World Bond Rates


World Bond Rates are basically the bond interest rates of different countries around the world. These World Bond Rates reflect the investors appetite for risk, and expectations of future inflation. For example in a strong economy, with low unemployment and inflation, high-risk investments like stock market rise, as do interest rates that banks pay savers, but slow economic growth and worries about inflation bring them down.

More About World Bond Rates

Continue reading to learn more about:

What are the 5 types of bonds?
How bond interest rates are determined?
What factors affect interest rates?
Do bonds go up when interest rates go down?
What does the market price of a bond depend on?


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What are the 5 types of bonds?


There are several types of bonds, but they all essentially differ in when they mature and the way in which interest is paid to the bondholders. The five types of bonds include:

1. Treasury bonds

2. Government agency bonds

3. Municipal bonds

4. Corporate bonds

5. Mortgage-backed securities


 
 

How bond interest rates are determined?


Bond interest rates are determined by two primary factors. Expectations of future inflation impact bond rates as well as general market supply and demand. Inflation poses a threat to the purchasing power of future interest payments – if investors expect the rate of inflation to rise, then they will demand higher-yielding bonds to compensate for the threat. Market supply and demand is driven by financial institutions and other large investors looking to create investment portfolios of highly liquid securities.

 

What factors affect interest rates?

Several factors affect interest rates, including a country's economic growth and level of inflation.
Changes in the economic conditions in a country can create an increase or decrease in demand for that country's goods and services by consumers and businesses worldwide. This will in turn create an increase or decrease in the ability of the country to pay back its loans. Higher interest rates can attract investors to the country, as they are rewarded with more income.
 
  • Do bonds go up when interest rates go down?

    Bonds go up when interest rates go down. The reverse is also true: bonds go down when interest rates increase. Bond prices are inversely related to interest rates - a concept called "price sensitivity." When market forces cause interest rates to rise, existing bonds become less attractive to investors because of the lower yield.
  • What does the market price of a bond depend on?

    The market price of a bond depends heavily on interest rates relative to the rate set by the bond issue. If interest rates are above the bond rate, then bonds which promise a lower return will be easier to sell. This is known as being at a discount (discounted bonds). On the other hand, if interest rates are below the bond rate, then bonds which promise a higher return will be easier to sell. This is known as being at a premium (premium bonds).