Why Are Bond Prices Plunging?

Interest rates have climbed precipitously in recent weeks, sending bond prices downward. But many investors don't really understand why higher rates are bad for bonds.

In the following video, Fool contributor Dan Caplinger explains how bond prices work and why rising rates are bad for bond investors. Dan notes that although new bond investors like higher rates, those who already own bonds suffer from having locked in low rates from earlier periods. Moreover, the longer the bond, the more of a price decline rising rates can cause.

Dan does note some bond investments that don't suffer from higher rates, while also pointing out some additional risks that have sent certain parts of the bond market down even further.

Many investors have replaced bonds with dividend-paying stocks. If you're on the lookout for high-yielding stocks, The Motley Fool has compiled a special free report outlining our nine top dependable dividend-paying stocks. It's called "Secure Your Future With 9 Rock-Solid Dividend Stocks." You can access your copy today at no cost! Just click here.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2513071, ~/Articles/ArticleHandler.aspx, 10/24/2014 9:02:06 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement