Bull Bond

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.

BREAKING DOWN '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. Principal Only Strips - PO

    A type of fixed-income security where the holder is only entitled ...
  2. Bond

    A debt investment in which an investor loans money to an entity ...
  3. Guaranteed Mortgage Certificate ...

    A bond backed by a pool of mortgages. These bonds are issued ...
  4. Consolidated Mortgage Bond

    A bond that consolidates the issues of multiple properties. If ...
  5. Original Face

    The par value of a mortgage-backed security at the time it is ...
  6. Mortgage Bond

    A bond secured by a mortgage on one or more assets. These bonds ...
Related Articles
  1. Economics

    How Interest Rates Affect The Housing Market

    Understand how rate changes can affect home prices, and learn how you can keep up.
  2. Home & Auto

    How To Choose The Right Bond For You

    Bond investing is a stable and low-risk way to diversify a portfolio. However, knowing which types of bonds are right for you is not always easy.
  3. Bonds & Fixed Income

    5 Fixed Income Plays After the Fed Rate Increase

    Learn about various ways that you can adjust a fixed income investment portfolio to mitigate the potential negative effect of rising interest rates.
  4. Mutual Funds & ETFs

    Key Strategies To Avoid Negative Bond Returns

    It is difficult to make money in bonds in a rising rate environment, but there are ways to avoid losses.
  5. Professionals

    Interest Rate Risk

    CFA Level 1 - Interest Rate Risk. Learn how interest rate risk relate to fixed income securities. Reveals how certain bond features can affect the level of interest rate risk.
  6. Bonds & Fixed Income

    Safety and Income: Bonds

    By Brian PerryWhen investing for safety and income, bonds are one of the most attractive asset classes. In this chapter, we will discuss some of the characteristics of bonds that make them an ...
  7. Bonds & Fixed Income

    5 Reasons to Invest in Municipal Bonds When the Fed Hikes Rates

    Discover five reasons why investing in municipal bonds after the Fed hikes interest rates, and not before, can be a great way to boost investment income.
  8. Retirement

    Analyzing The Best Retirement Plans And Investment Options: Bonds

    What they are: Debt securities in which you lend money to an issuer (such as a corporation or government) in exchange for interest payments and the future repayment of the bond’s face value. ...
  9. Options & Futures

    Top 6 Uses For Bonds

    We break down the stodgy stereotype to see what these investments can do for you.
  10. Bonds & Fixed Income

    Find The Right Bond At The Right Time

    Find out which bonds you should be investing in and when you should be buying them.
RELATED FAQS
  1. How does a bull market in stocks affect the bond market?

    Take a deeper look at the relationship between the bond market and equities, and see what might happen to bonds during the ... Read Answer >>
  2. Which factors most influence fixed income securities?

    Learn about the main factors that impact the price of fixed income securities, and understand the various types of risk associated ... Read Answer >>
  3. How does face value differ from the price of a bond?

    Discover how bonds are traded as investment securities and understand the various terms used in bond trading, including par ... Read Answer >>
  4. Do long-term bonds have a greater interest rate risk than short-term bonds?

    The answer to this question lies in the fixed income nature of bonds and debentures, often referred to together simply as ... Read Answer >>
  5. What causes a bond's price to rise?

    Learn about factors that influence the price of a bond, such as interest rate changes, credit rating, yield and overall market ... Read Answer >>
  6. What determines the price of a bond in the open market?

    Learn more about some of the factors that influence the valuation of bonds on the open market, and why bond prices and yields ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center