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. Which asset classes are the most risky?

    Equities is the riskiest class of assets. Dividends aside, they offer no guarantees, and investors' money is subject to the ... Read Full Answer >>
  3. How do you find accrued interest on a bond?

    A bond is a debt instrument issued by a company, government agency or municipality to raise money. Interest payments are ... Read Full Answer >>
  4. What techniques are most useful for hedging exposure to the drugs sector?

    Useful techniques for hedging exposure to the drugs sector include investing in stable, non-cyclical sectors that do not ... Read Full Answer >>
  5. What are the main disadvantages of fixed income securities?

    Fixed-income securities attract investors because they provide guaranteed returns in the form of fixed, regular cash payments. ... Read Full Answer >>
  6. What options strategies are best suited for investing in the automotive sector?

    The automotive sector is more volatile than the broader market. The sector is prone to big movements in both directions. ... 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. Mutual Funds & ETFs

    Pros & Cons Of Bond Funds Vs. Bond ETFs

    Understanding the pros and cons of bond funds and bond ETFs will help you choose the instrument that is best for building your diversified bond portfolio.
  5. Mutual Funds & ETFs

    Pros and Cons: Preferred Stock ETFs vs. Bond ETFs

    A look at the differences between preferred stock ETFs and bond ETFs and when you should invest in one over the other.
  6. Investing

    When Will The Bull Market End?

    A few weeks ago, the current bull market celebrated its sixth anniversary, making it one of the longest in history.
  7. Bonds & Fixed Income

    Understanding Negative Rates Of Europe's Central Banks

    We are currently seeing negative central bank deposit rates and government and corporate bonds with negative yields, but there are investors buying into these securities. Why?
  8. Economics

    The Fed's Impact On Emerging Markets

    Higher US interest rates could make it more expensive for emerging market borrowers to service their debt commitments.
  9. Investing

    What’s The Essence Of Smart Beta In Fixed Income?

    In essence, smart beta strategies seek to re-write index rules to capture factors, such as value, quality, or low volatility, in their stock portfolios.
  10. Investing

    Welcome Back, Volatility

    Volatility is likely to resurface as the Federal Reserve gets closer to adjusting its monetary policy stance, even if that adjustment is a measured affair.

You May Also Like

Hot Definitions
  1. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  2. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  3. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  4. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  5. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
  6. Tangible Net Worth

    A measure of the physical worth of a company, which does not include any value derived from intangible assets such as copyrights, ...
Trading Center