BONDS

Bonds are like investing in the debt of the company.
The company borrows money and pays out interest expense to the investors.
It is a safe form of investment incase the comapny goes bankrupt.

Investing Strategy
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ANALYSIS (Based on Interest rate)
STEP -I- Relation between Interest rate and Coupon rate (Rate of return)
Interest rate is DIRECTLY PROPORTIONAL TO Coupon rate (Rate of return)
If Interest rate is high, investors more want in return. They are taking the risk to invest in the debt of the company. Interest rates are high, borrowing becomes more expensive for the company since they have to pay out more in interest expense to the bond holder.

STEP -II Relation between Interest rate and Bond Prices
Interest rates ARE INVERSELY PROPORTIONAL TO Bond Prices.
If interest rates are high, Bond must be cheaper to buy and return rate must be high.

SUMMARY
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Interest rate (High)--- Coupon rate (High)--- Bond Price (Low- Cheap to purchase)

Interest rate (Low)- CouponRate (Low)--- Bond Price (High- Expensive to purchase)


RELATIONSHIP BETWEEN INTEREST RATE AND INFLATION
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High Interest rate= Low Inflation
Low Interest Rate= High Inflation


CURRENT SCENARIO
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Fed Interest rate @0%= Low, Inflation is Spiking up, Coupon rates are low, Bond Prices are high. Is it good to invest in bonds?