LOL have you even bought bonds? Bond earnings are inverse with interest rate, If interest rate goes up, bond prices falls and vice versa. You should buy bond when the interest rate is HIGH, and wait for it to fall to reap multiple earnings both from the interest and the rise of bond prices.

If you plan to hold until maturity, then the interest rate does not matter.

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Added on July 16, 2012, 1:12 pmYes the bonds have all risen in prices due to interest rates has been steadily declining not only in Malaysia, but in the world. If interest rates starts to shoot up, the bond value of 280k-290k will drop back to 250K or EVEN LESS if the interest rate EXCEEDS the bond coupon value. Be very very careful on this aspect. Even if you wait until maturity you will have capital loss as the bond will pay back it's nominal-value which is 250K when launched.

To buy bond, don't look at the bond price or the coupon value. You need to calculate the yield to maturity %.

This post has been edited by gark: Jul 16 2012, 01:15 PM

That one is a perpetual bond, which means no redemption date and the period is infinite. Even a slight increase in interest rate will kill the bond value. Very risky. But if interest rate is further reduced, you get a jackpot. Don't play if you don't understand.

Buying single bond CAN be as risky as equity. If you want to invest in bond, suggest to go a bond fund, where they have a basket of bond to mitigate the risk.

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Added on July 18, 2012, 9:57 amLike previously said, you need to calculate the yield to maturity. This can be calculated from the bond price, remaining period and coupon value. If you can list the above, we can calculate the yield to maturity to see if you got a bargain.

This post has been edited by gark: Jul 18 2012, 09:59 AM

If no call...until 2059

1st lot Yield To Maturity = 7.37%
2nd lot Yield To Maturity = 7.12%

If you buy now at current rate, YTM = 6.4%

If your bond is called in 10 years by the bank (you have no choice in this)...

1st lot Yield To Call = 7.25%
2nd Lot Yield To Call = 6.78%

If buy at current rate, YTC = 4.72%

IMHO, the bank is very likely to call the bond and re-issue one with lower interest rate... looking at the interest rate environment
Also the returns are somewhat higher than A-AAA diversified bond funds (5%-6.5%)... although some bond funds posted 9%-11% last year.

This post has been edited by gark: Jul 18 2012, 04:16 PM

Yes the cheaper the bond to the face value, the higher the yield, for example greek bond is selling at 30%-50% face value with yield as high as 35%, but the risk is greater. The shorter the period the lower the yield but more stability in interest rate movement, so this is risk vs. gain. Some people can sacrifice lower yield for better loss protection, so yes there are people who buy short term low yield bonds. Although the cuopon pays you 7.5% but since you have bought at inflated price, the yield will be lower. The decision to sell the bond depends on the YTM/YTC or the interest rate outlook in the future. If you think the interest rate going up then sell, if maintain stable or lower in the future then keep. Bond purchasers eye BNM announcement like a hawk.

You need to ask your RM to advice you all this the next time you buy bond, if he/she can;t answer or advice, find another RM.

This post has been edited by gark: Jul 20 2012, 10:45 AM