4 ms·
The bond interest payments are separate from the value of the bond. Which you can sell back at a greater premium and faster than even worrying about maturity.
by rolltiide 7y ago
The bond interest payments are separate from the value of the bond. Which you can sell back at a greater premium and faster than even worrying about maturity.
This is the greatest bull market in bonds of all time and they are starting to behave like cheap deep in-the-money options contracts, which decline slightly in value over time due to theta (time value). Options are fun.
- pmart123 7y agoI’m not sure how I get your logic? I do think the US bond yields have a large discrepancy versus other developed market yields, but convexity greater increases as yields fall towards zero. So how is that behavior similar to a deep ITM option?
- rolltiide 7y agothe only similarity is that a deep ITM option is an asset that decreases in value in one way while gaining in value in another way, due to the same forces. a negative yielding bond - or a bond going towards negative yield - decreases in value one way while gaining in a value another way, the more it gains in value the deeper the negative yield goes.