One might typically think that a high interest rate environment might be negative for bonds, that is not necessary so. Higher interest rates provides a more attractive entry point for bonds. Higher interest rates means higher coupon payments which translates into more income. Also, when interest rates rise, this suggest a stronger economy/more economic activity taking place, credit spreads will tighten as well which is beneficial for bonds.
Tan Choong Hwee
18 May 2021
Investor/Trader at Home
Bond price has an inverse relationship to interest rates. When interest rate is raised, bond price usually drop and bond yield increase:
While SSB is called bond, it is not traded in open market. It is issued monthly with yield following interest rate movement. You can actually redeem earlier tranches and switch to the latest tranche if its initial yield is higher than your existing tranches.
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