Tuesday, August 9, 2011

About US federal bonds selling securities or bonds at a negative yield . What does this mean?

This means that the bonds are sold to third parties more than the value at maturity. Say a year $ 100 1 bond has a yield of 3% so it's worth at maturity is $ 103. If someone buys the bond to the original purchaser of more than $ 103, then it would have a negative return.

Bond yield

All U.S. federal bonds have hidden a negative return when sold. That's because when you look at investments, one has to figure in taxes and inflation to see whether it's worth a raise and not only the total. Say there is a 3% inflation when the bond was issued on 3%. Although the link went to $ 3, inflation ended the purchasing power. What is worse for the owner is the person still has to pay taxes on $ 3, which is where performance comes into play hidden negative

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