2007-07-20 04:50:50 · 7 answers · asked by Mike G 1 in Business & Finance ➔ Investing
Bond yields can be looked at as a substitute for stocks. The higher the yield the more competition there is for stocks. So when yields are lower, people are willing to try and get better returns from stocks. Also lower yields indicative of more liquidity in the market, so there will be more capital available to buys stocks.
2007-07-20 04:55:01 · answer #1 · answered by redwine 6 · 1⤊ 1⤋
Generally, bond yields are an indicator of the cost of doing business. If interest, and costs are down, then companies are more likely to be profitable, and have more money to invest in new markets for expansion.
All of these things are good for companies. Stock prices are not only a reflection of the current worth and profitability of a company, but also an expression of the future worth and profitability of a company. Lower interest now means more jobs, more spending and a better company next quarter and next year, so investors buy more stock and the stock goes up.
2007-07-20 05:22:20 · answer #2 · answered by rlloydevans 4 · 1⤊ 1⤋
if bond yield fall, they are less attractive. people would be willing to accept some risk in the stock market hoping stocks will return more than the bonds. this is what many institutional investors do. so when they all start moving money into stocks you will se a general increase in stock prices.
2007-07-20 06:00:53 · answer #3 · answered by Zach C 1 · 1⤊ 0⤋
The 'hot' money goes where yields to risk are best . If bond yields drop then stocks look a better option.
2007-07-24 02:04:27 · answer #4 · answered by katerschenko 3 · 0⤊ 0⤋
If bond yields are down, people don't want to buy them. People with money have to put it SOMEWHERE - the stock market is an obvious choice, and if money's coming in, then stock prices generally rise.
2007-07-20 04:54:00 · answer #5 · answered by Judy 7 · 1⤊ 0⤋
Makes it cheaper for companies to borrow money; also drives those who have been investing in bonds for income to diversify into dividend-paying stocks, if the bond yield falls far enough.
2007-07-20 04:54:11 · answer #6 · answered by Andy 3 · 1⤊ 1⤋
Corporations gain value when they are able to take on profitable projects. The best way to make a nonprofitable project profitable is to lower the price. When interest rates fall, it makes the cost of funding projects cheaper -- so companies can take on more profitable projects. This causes their stock to rise.
2007-07-20 08:15:09 · answer #7 · answered by Ranto 7 · 1⤊ 1⤋