Why would you sell your bonds?
You sell any investment because you need to do something else with the money -- rebalance your investments, buy something, pay off a debt.... "Investment strategies abound. Bonds can be part of useful passive investment strategy but more active investors may develop a good number of reasons why buying and selling bonds on the short term. A few examples: Also, note that there is no guarantee in bonds as you imply by likening it to a ""guaranteed stock dividend"". Bond issuers can default, causing bond investors to lose part of all of their original investment. As such, if one believes the bond issuer may suffer financial distress, it would be ideal to sell-off the investment."
Notes and Bonds sell at par (1.0). When rates go up, their value goes down. When rates go down, their value goes up. As an individual investor, you really don't have any business buying individual bonds unless you are holding them to maturity. Buy a short-duration bond fund or ETF. "I can think of a few reasons for this. First, bonds are not as correlated with the stock market so having some in your portfolio will reduce volatility by a bit. This is nice because it makes you panic less about the value changes in your portfolio when the stock market is acting up, and I'm sure that fund managers would rather you make less money consistently then more money in a more volatile way.  Secondly, you never know when you might need that money, and since stock market crashes tend to be correlated with people losing their jobs, it would be really unfortunate to have to sell off stocks when they are under-priced due to market shenanigans. The bond portion of your portfolio would be more likely to be stable and easier to sell to help you get through a rough patch. I have some investment money I don't plan to touch for 20 years and I have the bond portion set to 5-10% since I might as well go for a ""high growth"" position, but if you're more conservative, and might make withdrawals, it's better to have more in bonds... I definitely will switch over more into bonds when I get ready to retire-- I'd rather have slow consistent payments for my retirement than lose a lot in an unexpected crash at a bad time!" The reason the market value is low is because the market does not believe that the company or country will pay. Another reason for it to go down is lack of liquidity in the market. However if you believe that the conditions would improve by the time bond matures, and you don't need money right now, then you can wait for maturity and get the maturity value. They get higher interest payments.  If they were to sell now they would get a premium over par.  They get principal back if they hold so no gain, only gain if they sell now.  But then they have to put it elsewhere (another bond, this time lower interest?) so it's a wash.  Depends what you use the money for. The point of short-selling as a separate instrument is that you can you do it when you can't sell the underlying asset... usually because you don't actually own any of it and in fact believe that it will go down. Shorting allows you to profit from a falling price. Another (non-speculative) possibility is that you don't have the underlying asset right now (and thus can't sell it) but will get it at a certain point in the future, e.g. because it's bonds that you've used to guarantee a loan... or grain that's still growing on your fields. I looked into the investopedia one (all their videos are mazing), but that detail just was not clear to me, it also makes be wonder, if a country issues bonds to finance itself, what happens at maturity when literally millions of them  need to be paid? The income needs to have grown to that level or it defaults? Wouldn't all the countries default if that was the case, or are bonds being issued to being able to pay maturity of older bonds already?  (I'm freaking myself out by realizing this) When the market moves significantly, you should rebalance your investments to maintain the diversification ratios you have selected. That means if bonds go up and stocks go down, you sell bonds and buy stocks (to some degree), and vice versa. Sell high to buy low, and remember that over the long run most things regress to the mean. &gt; The purpose of buying these bonds was not to step in due to the absence of a market. Rather, the purpose was to deliberately bid up the price of these bonds (ahead of the market), causing their price to rise and yields (interest rates) to drop.  There are some important things you need to understand about bubbles and how they form.  When interest rates are artificially low and down payments aren't required for many loans, do you agree this is a recipe for a bubble? You only pay tax on the capital gain of the bond, not the principal, unless the source of the money for the principal was gain from another investment, if that makes sense.   In other words, if you bought the bond with income earned from your job, that money was already taxed as income, so it isn't subject to taxation again when you redeem the bond.  On the other hand, if you cashed out of one investment and used those proceeds to buy a bond, then the entire amount might be taxable. And this is bad why? What is the total funding? What is the total return? Do you have the necessary facts to evaluate this?  Basing opinions on partial evidence makes poor public policy. Most municipal bonds might actually work out for the better good of communities. Certainly the total amount of bonds listed as going bad in this story is a tiny, tiny fraction of total bonds. "Its because of the economic uncertainty in the world. They are the ""risk-free"" investment as it is an almost guaranteed return if you exclude inflation and US gov't defaulting. A lot of people are afraid to invest elsewhere given the current economic climate.  The yield on bonds is also low due to government intervention. Quantitative easing 1 and 2 and operation twist has forced yield this low, as that is what the government wants." You should definitely favor holding bonds in tax-advantaged accounts, because bonds are not tax-efficient. The reason is that more of their value comes in the form of regular, periodic distributions, rather than an increase in value as is the case with stocks or stock funds. With stocks, you can choose to realize all that appreciation when it is most advantageous for you from a tax perspective. Additionally, stock dividends often receive lower tax rates. For much more detail, see Tax-efficient fund placement. "First note that CIBC issued these bonds with a zero coupon, so they do not pay any interest.  They were purchased by the market participants at a small premium, paying an average of 100.054 for a nominal value of 100.  This equates to a negative annual ""redemption"" yield of 0.009% - i.e., if held until maturity, then the holder will witness a negative annual return of 0.009%. You ask ""why does this make sense?"".  Clearly it makes no sense for a private individual to purchase these bonds since they will be better off simply holding cash.  To understand why there is a demand for these bonds we need to look elsewhere. The European bond market is currently suffering a dwindling supply owing to the ECBs bond buying programme (i.e., quantitative easing).  The ECB is purchasing EUR 80 billion per month of Eurozone sovereign debt.  This means that the quantity of high grade bonds available for purchase is shrinking fast. Against this backdrop we have all of those European institutions and financial corporations who are legally obliged to purchase bonds to be held as assets against their obligations.  These are mostly national and private pension funds as well as insurance companies and fund managers.   In this sort of environment, the price of high quality bonds is quickly bid up to the point where we see negative yields. In this environment companies like CIBC can borrow by issuing bonds with a zero coupon and the market is willing to pay a small premium over their nominal value. TL/DR The situation is further complicated by the subdued inflation outlook for the Eurozone, with a very real possibility of deflation.  Should a prolonged period of deflation materialise, then negative redemption yield bonds may provide a positive real return." "Not a bond holder, but when we get dividends we usually just buy up a benchmark index tracking ETF unless/until we're ready to rebalance our portfolio. Most of the trades in the day are earmarked with the reason ""spending cash"". I'd assume it's similar for bond holders and coupons." "The rate of the bond is fixed. But there is a risk known as ""interest rate risk"". Basically, if you have a 2 percent bond and market rates are 4 percent, you'll have to offer your bond at a discount or nobody would buy it. So if you ever needed to sell it, you'd lose a bit of money."