Bond year

Bond year

A key component of bond investing is the bond year, sometimes the maturity year. It depicts the period between now and the bond’s maturity date when the principal will be repaid. Investors must comprehend the idea of bond years to evaluate their bond investments’ timing and prospective returns. One may obtain important insights into the dynamics of the fixed-income market and make investing decisions by digging further into the specifics of the bond year. 

What is the bond year? 

The period until a bond reaches its maturity date is referred to as a bond year. It shows the years between the bond’s issuance and when the issuer will return its principal to the bondholder. The bond year has a significant role in establishing an investor’s time horizon and prospective rewards. It impacts how interest payments are calculated and the bond’s total yield. The bond year indicates the bond’s remaining life and aids investors in determining the timing and risk of their investment. 

Understanding the bond year 

Bond years are the time between the issuing of a bond to the date of maturity. It aids investors in understanding how long they will retain the bond and receive interest payments regularly. The bond year is determined by deducting the issue date from the maturity date. It aids in determining the risk and return characteristics of the bond and gives investors a clear schedule for their investment.  

Investors can monitor the time left before maturity and assess variables, including interest rate fluctuations, market circumstances, and the bond’s performance as the bond year goes on. It enables investors to organise their investment plans, keep track of cash flows, and make wise choices depending on their financial objectives and market state. 

Importance of the bond year 

The bond year is important when evaluating a bond’s investing features and risk factors. It gives important details regarding the time left until the bond’s maturity date, enabling investors to assess the length of their investment. The bond year influences the bond’s possible yield-to-maturity and the timing of interest payments. It helps in comparing various bonds’ respective maturities.  

Investors may make well-informed choices about their investment strategies by considering the bond year. For example, they can match the length of the bond with their investment goals, manage interest rate risk, and assess the possible profits over a given period. 

Benefits of the bond year 

The following are the benefits of the bond year: 

  • According to their financial objectives and time horizons, investors may better plan and coordinate their investment plans using the bond year. It makes it crystal obvious when the primary sum will be refunded. 
  • Investors can assess the risk associated with their investments by considering the bond year. Bonds with longer bond years often have more interest rate risk, whereas bonds with shorter bond years have faster principal repayment. 
  • Investors can better manage their cash flow by anticipating and planning future interest and principal repayments, thanks to their understanding of the bond year. 
  • Investors can diversify their risk exposure and improve their total risk-adjusted returns by having bonds with various bond years in their portfolios. 
  • The bond year is a key component in determining a bond’s yield-to-maturity. It aids investors in evaluating possible profits and contrasting the allure of various bond choices. 

Examples of the bond year 

The following example will help to understand the idea of a bond year. Consider a bond with January 1, 2032, maturity date issued on January 1, 2022. The period from the bond’s issue to maturity in this scenario, or the bond year, would be 10 years. Investors who buy this bond may anticipate receiving periodic interest payments during the bond’s 10-year life.  

Additionally, they will get their principal back on January 1, 2032, the maturity date. The bond year makes it easier for investors to comprehend the time frame of their investment and make appropriate plans. They can analyse the risk related to the bond’s tenure, calculate the yield to maturity, and consider how the bond fits into their broader investing plan. Reviewing the bond year, investors can assess if an investment fits their financial objectives, risk tolerance, and time horizon. 

Frequently Asked Questions

The bond year has certain drawbacks, even if it offers essential information regarding a bond’s maturity. It does not consider the possibility of early redemption or call options, which might cause the bond to be repaid before its declared maturity. It does not consider fluctuations in interest rates or market circumstances, which may affect the bond’s performance and value over time. The bond year alone cannot fully assess the bond’s creditworthiness or any potential hazards related to the issuer.  

The bond year measures how many years there are until a bond matures. Investors can use it to determine how long the bond will take to start paying interest and returning capital. The bond’s year gets shorter as time goes on, and its price may change depending on the state of the market and changes in interest rates. 

Some different types of bonds include government, corporate, municipal, high-yield, and convertible. 

Bonds might be an excellent investment for individuals looking for income, stability, and portfolio diversity. Although they might not always offer the highest returns, bonds are considered trustworthy investing. That is because they are recognised for offering consistent revenue. However, they are also regarded as a safe and reliable option for investing your money. Simply investing in extremely secure short-term Treasury bills, you might earn US$400 to US$500 for every US$10,000 you hold in a no-interest checking account. 

Determine your investment objectives and risk tolerance before you buy bonds. Next, research and decide which kind of bonds you want to buy. Become a member of a reputed financial institution’s brokerage programme. Use the brokerage platform to find and choose the special bonds you wish to buy. Place a buy order for the bonds with the desired amount and cost. The bonds will be credited to your brokerage account when the transaction is processed, and you will then be considered a bondholder with the right to receive periodic interest payments and the return of principal at maturity. 

 

    Read the Latest Market Journal

    Back in Business: The Return of IPOs & Top Traded Counters in March 2024

    Published on Apr 17, 2024 245 

    Start trading on POEMS! Open a free account here! At a glance: Major indices continue...

    Weekly Updates 15/4/24 – 19/4/24

    Published on Apr 15, 2024 52 

    This weekly update is designed to help you stay informed and relate economic and company...

    From $50 to $100: Unveiling the Impact of Inflation

    Published on Apr 12, 2024 135 

    In recent years, inflation has become a hot topic, evoking strong emotions as the cost...

    Japan’s Economic Resurgence: Unveiling the Tailwinds Behind Nikkei 225’s Record Leap

    Published on Apr 11, 2024 81 

    Source: eSignal, Intercontinental Exchange, Inc. In the heart of Japan’s economic landscape, the Nikkei 225...

    Weekly Updates 8/4/24 – 12/4/24

    Published on Apr 8, 2024 109 

      This weekly update is designed to help you stay informed and relate economic and...

    What Makes Forex Trading Attractive?

    Published on Apr 2, 2024 190 

    In a world where the click of a button can send goods across oceans and...

    Weekly Updates 1/4/24 – 5/4/24

    Published on Apr 1, 2024 97 

    This weekly update is designed to help you stay informed and relate economic and company...

    How to soar higher with Positive Carry!

    Published on Mar 28, 2024 136 

    As US Fed interest rates are predicted to rise 6 times this year, it’s best...

    Contact us to Open an Account

    Need Assistance? Share your Details and we’ll get back to you

    IMPORTANT INFORMATION

    This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

    An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

    Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

    Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

    The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <www.phillipfunds.com> for more information in relation to the dividend distributions.  

    The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

    The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

    This advertisement has not been reviewed by the Monetary Authority of Singapore.  

     

    Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
    250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
    Tel: (65) 6230 8133 Fax: (65) 65383066 www.phillipfunds.com