which is the effect of bonds on the market?

Answer 1

The stock market and the bond market are separate creatures. By dollar value there are more bonds than stocks.

Was your question about the impact of bond trading on stock trading? If so, the answer is yes. When bonds get cheap then money tends to flow from stocks to bonds. When stocks get cheap, the cash flows from the bond market to equity markets.

There is a right time to hold bonds and a right time to hold stocks. I've put a chart out on the web for you showing the eight key trades over the last 20-years where you should have moved from stocks to bonds.

http://www.fasttrack.net/answers/bonds-stocks.gif

The chart comes from Investors FastTrack.

http://www.fasttrack.net

Answer 2

That second answer, while interesting, did not say what the effect on the market is.

In general, when a bond yield (the amount of interest in pays), especially government bonds, goes up, it becomes more profitable to invest there, rather than stocks which MAY be resold at a higher price, but you might lose ALL your money. So when the yield goes up, volume in trading goes down, and prices can go down a little because of decreased consumer confidence.

Answer 3

In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and is obliged to repay the principal and interest (the coupon) at a later date, termed maturity. Other stipulations may also be attached to the bond issue, such as the obligation for the issuer to provide certain information to the bond holder, or limitations on the behavior of the issuer. Bonds are generally issued for a fixed term (the maturity) longer than ten years. U.S Treasury securities issued debt with life of ten years or more is a bond. New debt between one year and ten years is a note, and new debt less than a year is a bill.
A bond is simply a loan, but in the form of a security, although terminology used is rather different. The issuer is equivalent to the borrower, the bond holder to the lender, and the coupon to the interest. Bonds enable the issuer to finance long-term investments with external funds. Certificates of deposit (CDs) or commercial paper are considered money market instruments.