Explain the inverse relationship between the Fed Interest rate and the Bond yield rates?

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Explain the inverse relationship between the Fed Interest rate and the Bond yield rates?

2006-10-07 05:09:09 · 1 answers · asked by g g 1 in Education & Reference ➔ Higher Education (University +)

1 answers

When interest rate rises, people tend to buy newly issued bonds that will pay the higher interest rate amount, compared to your bond that has the older (before the rise in the rates) amount. That's why you have the inverse relationship between the two.
Read here for more detailed explanation:
http://www.investopedia.com/ask/answers/04/031904.asp

2006-10-07 05:17:36 · answer #1 · answered by economiss 5 · 0⤊ 0⤋