Interest rate reduction refers to lowering the interest on deposits and loans, which is a loose monetary policy. Since the beginning of this year, the central bank has cut interest rates many times, which is undoubtedly a good thing for users with mortgages. The mortgage interest rate has dropped, and so has the interest cost. So is interest rate cut good or bad for bonds? Let's get to know each other.

Is interest rate cut good or bad for bonds?

The interest rate cut is still good for the bond as a whole. After the interest rate cut, it is not cost-effective to leave the funds in the bank. Most people will choose to withdraw their funds for consumption or investment, which will increase the liquidity of financial markets, not only for the bond market, but also for the stock market. On the other hand, after the interest rate cut, it means that the creditor's rights issued in the later period will be lower in coupon rate than in coupon rate issued before the interest rate cut, and the income after purchase is not high. However, because the coupon rate of the bond is fixed, the bond price will rise after the interest rate cut, which is also profitable for investors.

When cutting interest rates, under normal circumstances, most investors will actively buy previously issued bonds in order to make profits when bonds appreciate in the future.

In fact, for users who invest in bonds, interest rate cuts are not fundamental. If you have decided to invest in bonds, you don't need to care so much about whether the bond price is high or low. The worst result is nothing more than holding bonds and getting back the principal and interest at one time.