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BDizzleNizzle OP t1_iuhphez wrote

Reply to comment by Werewolfdad in Brokered CD questions by BDizzleNizzle

>Yes and no. Brokered CDs are essentially bonds. As rates rise, the value of the bond will decline but as maturity approaches, the value will approach the face value of the bond

Oh, it's related to interest rates, not the number of remaining months left. So it's showing as down because it's a 3% rate but rates are higher so it's worth less in resale value?

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Werewolfdad t1_iuhqwk5 wrote

> So it’s showing as down because it’s a 3% rate but rates are higher so it’s worth less in resale value?

Correct (this is how all bonds are priced).

https://www.fidelity.com/learning-center/investment-products/fixed-income-bonds/bond-prices-rates-yields

At its most basic, bond prices go up when rates go down and bond prices go down when rates go up but prices approach 100 (ie par) the closer you are to maturity.

So say you had two bonds from the same issuer and same maturity. One has a 4% coupon and one has a 6% coupon. Prevailing rates at 5%. The first bond will sell at a discount while the second sells at a premium. The yield to maturity for both will be the same, however so it doesn’t matter which you buy.

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