Jane Howe, in her position as a market and financial consultant at Deloitte
Jane Howe, in her position as a market and financial consultant at Deloitte, offers expert knowledge on factors influencing the valuation of bonds. Market conditions affect the profitability and success of bonds leading to the presence or absence of a going concern. During durations of market fluctuations that attract an inflation risk, the par value of bonds reduces, and sale before maturity leads to losses. Moreover, the presence of liquidity risk in the financial markets lowers the level of money supply, hence reducing the valuation of bonds.
Financial and industrial ratings of corporate bonds influence the market perception of the creditworthiness of the issuer. As such, corporate and individual entities with a poor industrial, financial rating could suffer the loss of value and trade at a discount to par. To stabilize prices of bonds, an equilibrium market liquidity and controlling the price volatility secures bonds from losing value.
Interest rates as determinants of bond success rely on the prevailing liquidity levels in the financial and bond markets. With a rise in interest rates, the value of bonds fluctuates, leading to trading at a discount at par. A reduction in the interest rates strengthens the demand for bonds, causing a premium at par trading.
The age of a bond determines the success in financial markets since short term bonds attract higher premiums at par compared to long term structured bonds. Through the Treasury Inflation Protected Securities (TIPS) framework, bondholders access trading opportunities while retaining the value of corporate bonds before the date of maturity.
Type of bonds determines the presence of a going concern, such as unsecured bonds referred to as debentures that do not attract collateral securities. During instances of filing for chapter 11, bond security of debentures is limited despite oversight by the Treasury Inflation Protected Securities (TIPS). As such, investors ought to determine the type of corporate bonds that attract yields within safety margins.