long bond

Long Bonds

A bond with a long time until maturity, often defined as more than two years. This is also called a long coupon.

long bond

A debt security with a relatively long period remaining until maturity. Also called long coupon. Compare short bond.
What are the advantages and disadvantages of buying long bonds rather than short bonds?

The advantages of buying long bonds rather than short bonds are:

  1. you get to keep attractive interest rates longer;
  2. yields generally are higher on long bonds versus the yields you can obtain on short bonds;
  3. price swings are more significant, and thus profits are more substantial when interest rates fall;
  4. price swings are more dramatic when you hold a longer bond and its credit rating is upgraded, permitting it to trade at a lower yield to maturity regardless of what interest rates in general are doing.

The disadvantages of buying long bonds as opposed to short bonds are:

  1. you are stuck with unattractive rates longer (unless you want to take your lumps and move on);
  2. if the yield curve begins to take on a negative shape, or even if it simply begins to rise, as a holder of long bonds you probably will have much larger capital losses than you would have if you had chosen to buy shorter maturities instead;
  3. price swings are more dramatic when you hold a deteriorating credit and the bond's maturity is longer.

Stephanie G. Bigwood, CFP, ChFC, CSA, Assistant Vice President, Lombard Securities, Incorporated, Baltimore, MD

Long bond.

Thirty-year bonds issued by the US Treasury are referred to as long bonds. The interest rate on the long bond is typically but not always higher than the rate on the Treasury's shorter term notes and bills.

The rate on the most recently issued bond is the basis for pricing other long-term bonds and setting other financial benchmarks.

References in periodicals archive ?
Nor is it apparent that static long bond yields tally well with the robust pace of corporate earnings growth or household sector data.
The yield on the long bond has declined, the dollar has weakened and stocks have struggled.
The forms should be printed on long bond paper, with the voter accomplishing the forms in their own handwriting.
Global markets were stunned Thursday when the yield on Switzerland's long bond tumbled to less than 0 percent.
The ultra 10-year contract bridges the gap between the 10-Year futures contract and the long bond contract.
Looking back at 30-odd years of market data, global equity market falls of 20 per cent or more have been associated with a combination of three factors - quickly rising short interest rates, rising long bond yields or systemic meltdown (financial and euro crises), none of which are currently apparent.
Of late US long bond yields decoupled from short yields - which rose in response to an improving US economy and higher rates to come in 2015 - recording a pattern similar to yields in Europe.
Treasuries drifted lower as the 30-year long bond again surrendered price gains following an unexpectedly costly $16 billion government auction of new 30-year debt.
Five- and seven-year notes are getting crushed versus the long bond.
Investors will do well to invest in long bond positions.
Towers Watson compared the model of a sample plan's liability, based on capital market assumptions under MAP-21, to one based on a market-value method; this demonstrated that the decline in the value of a plan's long bond portfolio due to rising yields will no longer be offset by a decline in the value of a plan's liabilities.
PRUDENT PICKS Our experts' safe funds Ticker 1-Year 5-Year Fund Name Symbol Return Return Rydex Govt Long Bond RYGBX 49.