how does the 10 year bond rate effect bond prices?

Answer 1

This question can be interpretted in two ways:

1. How does the yield of the 10-year bond affect the price of the 10-year bond?

Bond prices move in the opposite direction from yields -- so if yield goes up, price goes down.

2. How does the yield of the 10-year bond affect prices of other bonds?

If those bonds are of a similar maturity, then their yields will go up and down with the yield of the 10-year -- so their prices will go down and up with the prices of the 10-year. Yields for short term bonds are correlated with those of 10-year bonds -- but often move in opposite directions. This means that their prices are less affected by yield changes in longer term bonds.

Answer 2

You've got your logic backwards. The 10-year bond rate is computed based on prices of outstanding 10-year bonds.

Answer 3

I think you have the question backwards. Current bond market conditions affect existing 10 year bonds. If your note is yielding less than current market conditions, then your note would sell for a dscount on the market. If your note was yielding more than market conditions, then it would see for a premium. The bond market is just a balancing act.