5Mo·

Interest Rates 📉

I share with you a new purchase I made through Trade Republic, long term bonds give better yields than the current interest bearing accounts and I can benefit from a drop in interest rates.

It is a small amount but I prefer to have most of it in money market funds to be able to rotate the capital to equities in case of a crisis or a rise in interest rates.

28.01

ITALY, REPUBLIC OF (GOVERNMENT) 4.5% 23/53

Acheté x334,00 € à 105,06 %

350,90 €

7 Commentaires

Frank@BlueVelvet

5Mo

Not such a bad idea to hedge your portfolio with bonds ;-)

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Alfredo Arcos Alegría@Alfre2

5Mo

@BlueVelvet Thank you :)

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Stevoo@Stevoo13

5Mo

Bonds with a long maturity date like that mean rates could get higher at some point

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Alfredo Arcos Alegría@Alfre2

5Mo

@Stevoo13 that's right but I could sell whenever I want, so it’s also mean that if the interest rates go down the price of the bond is more likely to go higher cause it has long maturity as you said and also the opposite (if the interest rates go up) but in that case I wouldn’t sell it’s still a good interest rate 4.28% so I wouldn’t be disappointed 🤷‍♂️

If the interest rates goes up I will be more afraid of the stock market 📉 💀

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Stevoo@Stevoo13

5Mo

@Alfre2 I’m with you man…looking for some bonds myself to lock in the rates (shorter maturity though)

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Jose@Kspykee

1Sem.

Do you get paid 4% with no penalty if you sell early?

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Alfredo Arcos Alegría@Alfre2

1Sem.

@Kspykee if you buy a bond at 4% it will pay you that until the end of the contract, but if you want to get rid of it before then you have to sell it at the price you are paid in the secondary market, which will depend on other factors such as interest rates, country risk and the levels of public debt issuance.

The only thing that can be done to avoid that risk (which can also mean an extra yield in cases of falling rates) is with an instrument such as options on the interest rate but it is quite complex and also involves contracting costs and others, I myself would not know how to make a correct operation with options to hedge the risk, it is a more complex market and there is not much talk about it on the internet which also makes it difficult to learn.

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