Following on from part 1, we now need to understand the market influences that can change the price of a bond. This second tutorial on bond prices will explore the primary market factors that can cause prices to change. Several factors affect bond prices and we’ll explain these in this module. Are there differences between government and corporate bonds? The objective of the tutorial is to give you the ability to assess why a particular bond price has changed and what might cause it to change in the future. Changes in bond prices will always have an immediate effect on your bond trading profits and losses so you’ll need to be aware of these factors.
We’ll explore:
Why bond prices change?
Current interest rate or yield to maturity
Changes to interest rates
Liquidity premium