Long bond

economic-dictionary

Long-term bond is what long-term bonds are called, that is, those with a duration and operational prospects greater than the calendar year.

In general, long bonds are fixed income assets, whether corporate or public (government or state), which have two fundamental elements:

  • Initial capital: Disbursement we make to acquire a title in order to obtain a temporary payment.
  • Interest: It is the return on the investment that we have made by lending the initial capital.

In the financial field, the long rating is usually placed when the duration is greater than one year. However, in the case of bonds, it is considered such when its duration is between 10 and 30 years. Short bonds that have a duration between 1 and 3 years. Medium-term bonds that last between 3 and 10 years.

This type of assets is usually the most used way to obtain large levels of long-term financing, which favors the financial stability of large corporations and the support of large actions and financial decisions.

Decisions to invest in a long-term bond

The 3 big decisions to take into account when thinking about obtaining a long-term bonus are the following:

  • Need for money: If we have a slack in our savings, go ahead.
  • Monetary stability: Most of the people and agents who acquire bonds are profiles with greater aversion to risk and focused on the stability of obtaining an almost guaranteed return for many years, such as investment agencies in fixed income and people who are elderly or close to The retirement.
  • Future risk: With long-term bonds there may be two situations. If the interest rates are below the yield of the bond, we have a real and also assured profit. The opposite case is when the yield of the bond is lower than the average interest in the market. We are facing a theoretical loss and an opportunity cost greater than having invested in another product.

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