Bond prices drop when yields go up and Vice-versa. It confuses many, but the logic is pretty simple.
Imagine you own a bond paying 3%. If the government starts issuing new bonds paying 5%, nobody wants your lower paying bond anymore. You cant really sell them anymore. The market value of your asset drops because better options exist.This is exactly why increasing yields crush long duration bond funds like $TLT. When new yields go up, old bond prices must go down to attract a buyer. Vice versa when yields fall.What does this mean for the stock market? High yields act like pure gravitational pull on equities, especially growth and tech names in indices like $QQQ and $SPY. When institutional capital can get a guaranteed, high return from safe government bonds, they pull money out of risky stocks. Don't overcomplicate the macro. It's just a see-saw.The copyright of this article belongs to the original author/organization.
The views expressed herein are solely those of the author and do not reflect the stance of the platform. The content is intended for investment reference purposes only and shall not be considered as investment advice. Please contact us if you have any questions or suggestions regarding the content services provided by the platform.
Post your comment
No Comments