Introduction to bonds
Description
Vocal Characteristics
Language
EnglishVoice Age
Middle Aged (35-54)Accents
North American (General) North American (US General American - GenAM)Transcript
Note: Transcripts are generated using speech recognition software and may contain errors.
Now let's talk about bonds and interest rates. Bond prices are sensitive to changes in market interest rates, and the two have an inverse relationship. That means when one goes up, the other declines. For example, when interest rates rise, the prices of existing bonds fall, and when interest rates fall, bond prices rise longer until the maturity of a bond. The more sensitive its price will be, too. Changes in market rates, in fact, maturity and yield are directly connected. A good way to understand this link is to draw a line between the yields of bonds of the same quality with different maturity rates, otherwise known as the yield curve. Typically, the curve is upward sloping, as you see here, but occasionally it will be downward, sloping or inverted. Traditionally the harbinger of recession. Bonds with different maturity is respond to different market forces. Short term bonds are often affected by short term rates pegged the Federal Reserve policy. Intermediate and long term bonds respond more to inflationary trends and outlook. Other factors that influence certain types of bonds include overall economic conditions and the potential for future changes in tax law.