Bull Bond

AAA

DEFINITION of 'Bull Bond'

A bond that is likely to increase in value in a bull market, when interest rates are declining. Most bonds tend to increase in value when interest rates decline, but bull bonds refer to types of bonds that do especially well in this environment.

INVESTOPEDIA EXPLAINS 'Bull Bond'

A common example of a bull bond is the principal only (PO) strip mortgage-backed security. Whereas most bonds will increase in value in a declining rate market, mortgage-backed securities perform especially well. POs are mortgage securities created by separating principal payments from interest payments collected in a pool of mortgage securities. The principal payments are then combined to form a mortgage pool. PO mortgage securities do well in a falling rate market because mortgage holders refinance their loans at lower interest rates. Investors are repaid their original investment more quickly, increasing the rate of return for the mortgage-backed security.



RELATED TERMS
  1. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Bull Position

    A long position in a financial security, such as a stock in the ...
  3. MBS Pool Number

    A number or alphanumeric character assigned to a mortgage-backed ...
  4. Bull Market

    A financial market of a group of securities in which prices are ...
  5. Mortgage-Backed Security (MBS)

    A type of asset-backed security that is secured by a mortgage ...
  6. Bear Market

    A market condition in which the prices of securities are falling, ...
RELATED FAQS
  1. Are we in a bull market or a bear market?

    A bull market is represented by a rising price trend, and a bear market is indicated by a falling price trend. Given this ... Read Full Answer >>
  2. What is the relationship between the current yield and risk?

    The general relationship between current yield and risk is that they increase in correlation to one another. A higher current ... Read Full Answer >>
  3. What is a 'busted' convertible bond?

    In finance, a convertible bond represents a hybrid security that offers debt and equity features and risks. While a convertible ... Read Full Answer >>
  4. How can I hedge my portfolio to protect from a decline in the food and beverage sector?

    The food and beverage sector exhibits greater volatility than the broader market and tends to suffer larger-than-average ... Read Full Answer >>
  5. How attractive is the food and beverage sector for a growth investor?

    The food and beverage sector is attractive for a growth investor. The sector's high degree of volatility means it tends to ... Read Full Answer >>
  6. What techniques are most useful for hedging exposure to the insurance sector?

    Investing style determines the best hedging techniques for the insurance sector. This sector comprises three segments, two ... Read Full Answer >>
Related Articles
  1. Bonds & Fixed Income

    Profit From Mortgage Debt With MBS

    Mortgage-backed securities can offer monthly income, a fixed interest rate and even government backing.
  2. Bonds & Fixed Income

    How Bond Market Pricing Works

    Learn the basic rules that govern how bond prices are determined.
  3. Active Trading Fundamentals

    Digging Deeper Into Bull And Bear Markets

    Discover why it's important to know the characteristics of the two types of market conditions.
  4. Fundamental Analysis

    Present Value Interest Factor of Annuity (PVIFA)

    PVIFA can be used to calculate the present value of a series of annuities by considering cash flows and depreciation.
  5. Mutual Funds & ETFs

    ETF Analysis: Vanguard Total Bond Market

    Learn about the Vanguard Total Bond Market exchange-traded fund, its primary portfolio holdings and risk/reward profile based on its past performance.
  6. Mutual Funds & ETFs

    ETF Analysis: Direxion Daily Energy Bull 3X

    Learn more about one of Direxion Fund's high-risk, high-reward energy plays: the Direxion Shares Funds Trust 3X exchange-traded fund.
  7. Bonds & Fixed Income

    What are Floating-Rate Notes?

    A floating-rate note is a debt instrument with an interest rate that “floats,” or varies. They are also called floaters.
  8. Economics

    Will the Selloff in China Hurt the Global Economy?

    Though China is the world’s second largest economy, its volatility in the stock market is unlikely to have an impact on the global or Chinese economy.
  9. Investing

    Five Portfolio Moves For The Second Half

    After a relatively calm few months, market volatility is back. If you are an investor, we help you prepare your portfolio with these five portfolio moves.
  10. Bonds & Fixed Income

    Junk Bonds: Does High Yield Equal Extreme Risk?

    High-yield bonds present a lot of risks but do they outweigh the rewards? Here are some ETFs to consider, with caution.

You May Also Like

Hot Definitions
  1. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  2. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  3. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  4. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  5. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  6. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!