Bond1

Basic

1. "bond" is an instrument that signifies a loan by a consumer or institution to another institution.
2. Federal government issues Treasury bonds which investors buy thereby loaning money to the Federal government.
3. States and municipalities issue "municipal" bonds which investors buy thereby loaning money to states and municipalities
4. Corporations issue "corporate bonds" which individuals and other institutions buy thereby loaning money to those corporations.

Price

1. Time
2. interest rates
3. Issuers' creditworthiness

Characteristics

1. the longer the "maturity" of a bond the higher will be its yield
2. When interest rates go up the value of bonds of longer maturities go down more than those with shorter maturities. Likewise when interest rates decline, the longer the maturity of a bond the more the value of the bond increases.
3. risks associated with bonds issued in currencies other than the U.S. dollar
4. FED buy more treasury bonds>> price of bonds to increase >> yields decline >> Interest rate decreases
5. 
   
6. Deflation good for bonds >> price increase >> money received from bonds is more valuable.
7. Deflation = liquid assets (currencies) increased in value and other assets (properties and etc) decreases.