What Are Bond Indicators?
What Are Bond Indicators?
Bonds generally provide a high degree of safety with regularly scheduled interest payments over the life of the bonds. However, bonds do fluctuate in value, usually because of changes in interest rates. Because you can sell or swap your bonds, you will want to know the value of your bond at any given point in time.
Things To Know
- A bond indicator is a way to judge how well a bond is doing in the bond marketplace.
- You can examine a bond’s performance by looking at bond indexes.
A bond indicator is a measure of a bond’s performance. It is a way to judge how well a bond is doing in the bond marketplace. It lets you know whether your bond value is up or down from the time you originally bought the bond.
The value of using an index
One way to examine a bond’s performance is to look at bond indexes. An index is a benchmark that reflects the performance of a select sample of bonds. The bonds chosen are meant to be representative of the overall bond market. Each index uses a different mathematical formula to measure overall bond performance and risk. Bond indexes can be found in most major financial and business publications such as the Wall Street Journal.
Consider credit ratings
A second way to evaluate the performance of a bond is to look at its credit rating. A credit rating measures a bond issuer’s ability to meet its obligations to pay interest and return the principal of its bonds. It is a measurement of your investment risk. A bond’s rating is based on the financial health of its issuer and affects the price of the bond.
Look at economic indicators
By looking at overall economic indicators such as interest rates and inflation, you can also predict how the bond market will do. Steady economic growth can lead to inflation, causing interest rates to rise and bond prices to fall. The reverse is also true: low inflation and low interest rates lead to higher bond prices.
