>No bank / institution today probalby wants older bonds that yield e.g. 1% if bonds issued today yield 3.5% and the Fed interest rate is 4.75-5.00%.
It is more complicated than that because the price of the bonds change to account for the market alternatives.
As an example, Would you rather buy a bond that returns $1005% for $100, or a greater number of bonds that return $1001% for $20 each?
Because the price of the low interest bond is discounted, the annual ROI is the same as the high interest bond. Additionally, if you hold to maturity, the ROI is better with lower interest (in this example)
It is more complicated than that because the price of the bonds change to account for the market alternatives.
As an example, Would you rather buy a bond that returns $1005% for $100, or a greater number of bonds that return $1001% for $20 each?
Because the price of the low interest bond is discounted, the annual ROI is the same as the high interest bond. Additionally, if you hold to maturity, the ROI is better with lower interest (in this example)