accounting for bonds in a fund

[bappelbe]

Hi
(My question is about bonds in my pension please move this if I am posting in the wrong forum)
I have a pension (with New Ireland) invested in a "lifestyle" fund.
There is a portion of my fund invested in bonds (government and corporate).

At the moment bonds are yielding a very low interest rate.

My question is: Is this accounted for in my statements at an artificially high rate?
ie. if the bonds were bought by the fund when the rate was 4% and they are now 2% do they now value them as having doubled in value? so if/when they go down (rate goes up) or are repaid to the fund that "rise" that I am seeing in my statement will disappear.
Also if that is the case the units that I buy now would appear to be overvalued.

I hope I made this clear enough.

 

[cremeegg]

if the bonds were bought by the fund when the rate was 4% and they are now 2% do they now value them as having doubled in value?

Yes, because they have doubled in value.

If a bond was bought for €100 with a 4% yield, the price of the bond would have to rise to €200 for the yield to fall to 2%

so when they (...) are repaid to the fund that "rise" that I am seeing in my statement will disappear.

Yes. If the bonds are to be repaid in the short term then the only value they can have is the redemption value.

if that is the case the units that I buy now would appear to be overvalued.

Probably not, at least not for the reasons you are worried about.

If a company or government issues €100 in the form of say a 10 year bond at a nominal 4%, that implies a stream of 10 payments of €4 each year for 10 years plus one payment of €100 in 10 years time.

The value of this stream of payments shouldn't rise or fall by much over the 10 years. It certainly would not be expected to double