MKI Trading & Investing Academy

Factors Affecting Bond Trading

Category: Beginner Markets October 16, 2024

Bond trading can be an effective means of investing and generating income. It is important to understand the risks and market requirements before getting started.

Factors Affecting Bond Trading

  • Interest Rates: Bond prices are affected by changes in interest rates. When interest rates rise, bond prices fall, and vice versa.
  • Credit Rating: The credit rating of the issuer impacts the safety of the bond. Higher-rated bonds are considered less risky.
  • Inflation: Inflation can affect the real returns of bonds, thereby influencing their attractiveness.

Benefits of Bond Trading

  • Steady Income: Bonds typically provide fixed returns through regular payments.
  • Portfolio Diversification: Bonds can help diversify a portfolio and reduce risks.
  • Relative Safety: Government bonds are considered safer compared to stocks.

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