JL Wee

15 Apr 2020

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General Investing

For bonds, should I yield to maturity without making the assumption of reinvesting coupon payout?

I found out that bonds YTM has the assumption that you will reinvest the coupon amount with a similar return rate. However, I find that this is quite an assumption and would like to ask is it better if we gauge the YTM without assuming the reinvestment component?

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Yang Teng

11 Apr 2020

It will have to depend on the type of bond you are investing in. If you invested in a bond that re-invests the coupons instead of paying it out, you can just follow the YTM.

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What exactly is yield to maturity? How are bonds priced in? I am trying to understand the differences between coupon rate and yield to maturity?

Do the SSB prices fluctuate during the maturity period? Is it possible if I bought the bonds for 500$ then during the coupon payment period prices go up and down and I call sell to book profit ? How long is the maturity of these bonds? Thanks!

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