Bond Risk

The risk associated with investing in bonds. Major examples of bond risk include interest rate risk, which is the possibility one may not be able to reinvest at the same interest rate upon maturity; credit risk, which is the risk of default by the issuer; and inflation risk, which is the possibility that the inflation rate may outpace the return on the investment.

References in periodicals archive ?

Backus, Gregory, and Zin (1989) demonstrate the failure of a standard model in accounting for the sign and the magnitude of real bond risk premia.

The Real Term Premium in a Stationary Economy with Segmented Asset Markets

It's actually also about the rise of electronic trading platforms, the rise of different ways to trade bond risk through things like an ETF.

Expecting to Grow: A study shows more than 600 insurance companies were using exchange-traded funds in their investment portfolios in 2017

Li Daokui, director of the Centre for China in the World Economy at the Tsinghua University School of Economics and Management and a member of the Chinese People's Political Consultative Conference, said, 'Allowing banks to participate in treasury bond transactions on exchanges will permit improved regulation of treasury bond risk, and heighten the stability of the spot market.'

Chinese economist calls for unification of China's market for treasury bond futures

By contrast, investors are currently not being well compensated for investment grade bond risk, in our view.

The good, the bad and the ugly

For example, taking a Credit Default Swap of 200 basis points for an investment-grade instrument (Baa) as a reference, using Moody's (2008) non-payment statistics, with a recovery rate of 37% over an investment term of five years, the bond risk premium is 176 basis points, which is 24 basis points less than the CDS.

Cost of capital in emerging markets: bridging gaps between theory and practice

In the model, the liquidity factor is regarded as an additional factor that does not span the yield curve, but improves the forecast of bond risk premia.

An empirical analysis of unspanned risk for the U.S. yield curve/Un analisis empirico del riesgo no-generado por la curva de rendimientos de bonos de los Estados Unidos/Une analyse empirique du risque non-genere par la courbe de rendements des obligations des Etats-Unis

Bond Risk The Markit iTraxx Europe Senior Financial Index of credit-default swaps on banks and insurers climbed 31 basis points to 126 basis points, also the biggest increase since 2007, according to data compiled by Bloomberg.

Shock waves ripple through credit markets after U.K. Brexit vote

Michael Bauer and Glenn Rudebusch argue that similar measures of expectations may mismeasure the signaling effect because they ignore the effects of QE on bond risk premiums.

Did quantitative easing work?

A repeat of the 2011 Eurozone debt crisis is almost assured in 2015 and yet financial markets price EU bond risk as though it was negligible and Draghi's European Central Bank actually can buy bonds.

CAN THE US RECOVERY CONTINUE IN 2015?

In fact, corporate bond risk premiums in Sweden did not diverge much from economic fundamentals and only began to increase in 2011 after most of the policy rate increases took effect, as the chart on the next page shows.

Should monetary policy monitor risk premiums in financial markets?

We start by examining how the bonds issued by the largest banks over the 1985-2009 period compare with those issued by smaller banks in terms of their credit spreads over Treasury securities of the same maturity, controlling for bond risk and other factors that may affect bond spreads.

Evidence from the bond market on banks' "too-big-to-fail" subsidy

Modest adjustment of the criteria used in mortgage bond risk modeling would have radically altered the expected outcome, in some cases changing a huge profit to a disastrous loss.