Should-I-sell-my-bond Calculator?

[murray t turtle]

That’s beside the point; furthermore, I have no idea what rates will do.

Very simple example: I purchase a 1Y T note with a 5% yield for $10000. I expect to be paid a total of $500.

The next day, I get lucky. The market price moves, and my bond is now worth $10,512.

I should sell, because I’ve already made my yield in a day. Why wait a year to make that 5%, and risk the price moving against me, when I can cash in today, make my paper, and reinvest?

What if the decision is not so clear? After two months, My bond is worth $10,200? 10,150? When does it make sense to sell?

Exactly we dont knoW;
if i had ''known'' for the only year in my life[2022, could not find some real estate i want]] i would have bought a cd or something better than the super low rate in community bank.
Sounds like his selling rule tends to be right.[I would not auto sell my ETFs with a 5% gain ; but $10,200\10,150 gain , in MARCH \sell it this close to FED wed also]
But now my[MARCH-APR] bias is towards tech ETFs;
+ SSO looked so good with rising rates i sold [exit] on it today.
Especially with SPY underperforming qqq to the maximum\LOL

 

[Actuarial_Fun]

You could create this fairly easily in excel. Theoretically, your 1 yr bond at issue, if at par, would be 10,000 with a 5% coupon and principal payment in 1 year. To determine the price in future days you would simply discount the payment by the current rate, adjusted for less days to maturity. So if the rate is always 5%, theoretically, your 10000 should slowly increase as you discount the 1 year payment for less days each days. If the rate changes in initial day you just discount the payment to come up with new price.

So, essentially settlement payment * (1+i) to the -(# of days since issue / 365), where i is current rate.

The only reason you should get big jumps is if you have a junk bond that has a significant reduction in credit risk, leading the interest rate to go down significantly as rate should be risk free rate + tax adj + credit risk, essentially, so reduction in credit risk bps would significantly change price. Obviously significant change in treasuries would also impact price.

Hope this helps. Let me know if you have questions.l