DEMO — development content for layout testing. Not real editorial reporting.
DEMO content for development and layout testing — not real editorial reporting.
A bond promises fixed payments. When market interest rates rise, existing bonds with lower coupons become less attractive and their prices fall until their yields match the market.
How it works
Expected inflation erodes the real value of fixed payments, so bond investors demand higher yields when they expect prices to rise faster.
Bond prices and yields move in opposite directions. Several forces drive both.
What to watch
Credit risk adds a further premium: the less certain investors are of being repaid, the higher the yield they require. Liquidity and the length of the bond also matter.
Key concepts
- Bonds
- Interest rates
