Are falling bond market yields good or bad?

Answer 1

Lower yields can be good or bad -- but are generally considered good.

If you own long-term bonds and yields fall, the value of your bonds increase -- and this is good for you.

If you own short-maturity bills and need to reinvest them, then rates going down is a bad thing for you. Since your bills are about to mature, they don't gain much in value when rates go down. And since you have to reinvest, you will be doing so at a lower rate.

If the yield curve shift is not paralell, it could be bad news. For example, if short rates stay the same, but long-term rates decrease & the yield curve inverts, then there could be a recession on the way. The idea here is that the long term rates are coming down because demand for long and medium term notes is increasing. This usually happens when firms decide not to reinvest in their companies. In a few quarters, production is down and a recession ensues.

Finally, another reason why rates falling can be a good thing (other than when the curve inverts): If all rates are falling, then corporate projects that did not look good suddenly become profitable (lower rates essentially lowers the cost of funding a project). This means that firms will start to invest more in their operations -- creating jobs, creating products. GDP goes up and the economy improves.

Answer 2

Falling bond yields are generally a bullish sign. If you are a bond holder, the value of your bonds increases as yields drop. From a macroeconic standpoint, the cost of money is less as bond yields drop. Cheap money spurs investment and economic growth.

Answer 3

Good for long term principle, find some high yielding bonds http://bond-yields.com

Answer 4

Definitely bad, it means that you will be able to get more returns if you invest in other vehicles instead e.g. shares or unit trust.

Answer 5

Depends on whether you are a borrower or lender. For borrowers it is good. For lenders, not so good.