Bond tables of probable future returns

by Joseph E. Murphy

Bond Tables of Probable Future Returns is designed to aid in the evaluation of the effect on bond returns of interest rate risk. The tables do not predict the direction of bond returns; instead they provide probable ranges to which the current return on a particular maturity bond may rise or fall by a specific date in the future. The tables are arranged by initial yields to maturity. The tables present probabilities for initial yields of from 0.5% to 20% for 15 bond maturities and 35 forecast periods. Each table gives nine probabilities, one for no change in rates, four for declines in rates and four for increases.

Six probabilities are given: 50%, 40%, 30%, 20%, 10% and 5%. The level above which returns will probability rise (or fall) is given for each probability. The tables offer a more precise method of evaluating the effect on bond returns of interest rate risk than has been previously available. If you plan to invest in short bonds in hopes of a rise in rates, the tables provide the probabilities of a potential rise in returns as well as the risks of a decline in returns. The tables offer a unique approach to evaluating the effect on bond returns of interest rate risk.

The tables are based on the fact that the volatility of interest rates is a function of the forecast period, the maturity of the bond and the current level of rates. Probable changes in returns can be calculated from probable changes in bond yields and prices. The probable future returns are based on the yields and prices contained in Bond Tables of Probable Future Yields and Bond Tables of Probable Future Prices.

423 pages, Paperback

First published May 25, 1997