Reinvestment risk is the danger of purchasing new bonds at lower yields than previously received. Reinvestment occurs when a central bank has lowered interest rates after you’ve purchased a bond issued in a currency affected by a rate change. Your bond will pay higher amounts of interest than the newly issued bonds but you will be forced to reinvest your payments at the lower interest rate.
You are more likely to encounter this problem with callable bonds. If the interest rate drops the bond’s issuer is more likely to call and issue new debt at lower interest rates. These actions save issuers money, but force you to choose between lower rate bonds. You have several other options. You can shift the money into other vehicles, such as equities or commodities, until central banks raise interest rates back to where they were. You can invest in bonds with higher risks which also deliver higher returns. Lastly, you can look for bonds issued beyond the limits of the central bank, which are paying higher rates at the nearly the same risk level.
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International Economic Analysis:
- Major Currency Economic Summaries
- Performance of Major Imports and Exports
- Mandates of Central Banks versus Expectations
- Performance Indexes of Major Economies
- Economically Correlated Currency Projections
- Large Funds Currency Sentiment Readings
- List of Technical Indicators to Look For
- Occasional: Foregin Exchange Technicals Markups
American Markets Analysis:
- Summaries of American Economic Structure
- Performance of Major
- Federal Reserve Mandate versus Expectations
- Performance Indexes of U.S Economy
- Economically Correlated U.S Dollar Projections
- Large Trading Fund Index Sentiment Readings
- Market Wide Earnings Versus Valuations
- Fundamental Ranking of U.S Business Sectors
- Best and Worst Future Consensus Estimates
- Occasional: Firm Fundamental Strength Report
- List of Technicals to Look for While Trading
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