|
Post by account_disabled on Feb 12, 2024 19:01:56 GMT 12
If youre wondering how thats possible dont worry The answer is very simple. From an investors perspective a higher yield means a more attractive investment which encourages buyers to buy more bonds. On the other hand if you own a bond you want the yield to be low because the low yield keeps bond prices high which makes selling a good situation for you. So we can say in simple words When bond prices go up bond yields go down and vice versa. The effect of interest rates on bond yields A bonds Brunei Email List yield depends on the face value maturity etc. depends on many factors such as But the most important of them is the current interest rate in the market. When bond interest rates rise they lower the price of attractive to investors than the original bond. If a bondholder wants to sell his bond when interest rates are higher than the coupon rate of the bond he is holding he is forced to lower the price of his bond which in turn increases the bonds yield. On the other hand if a bondholder wants to cash out their investment when the market interest rate is below their coupon rate they can realize a capital gain by increasing the value of their bond. This means that higher interest rates lead to higher bond yields and as interest rates fall yields rise and the relationship between interest rates and yields is direct.
|
|