“ok, i see how prices change as yields change. but why would you sell at all when yield is increasing? are you not taking a loss? you already have a guaranteed fixed income from it…”
Same reason why you would sell a stock that has dropped a bit and seems undervalued. Look at GE….sales and earnings have gone up and the stock has essentially flat lined. You could have made better money somewhere else for the past 5 years.
Why settle for the 2% bond that you bought in 2003 that continues to drop in value? Now, it’s 5.25%, but you might sell if you think it will hit 7. Cash out, wait for yields to hit 7%, and buy back in.
