Investing / Best funds or ways to play rising bond yields? What does it mean in simple language?
Oct 04, 2021
Best funds or ways to play rising bond yields? What does it mean in simple language?
Getting a hold of investing and trying to learn by "doing." Any simple explanations of the impact rising bond yields have? I think I've seen it covered here but couldn't find it. Thanks in advance.
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How Bonds Work
Investing
6 min
Replies (3)
Oct 04, 2021
It's a great question. Yields were just climbing earlier this week but look to be pulling back as of Friday. Firstly, bond yields and prices move in opposite directions. A yield is the expected reward or payout you’ll eventually earn from buying a bond, say a Treasury note. A Treasury note's yield impacts rates for loans (like mortgages and others) and can gauge the state of the economy. Rising bond yields can mean that people are optimistic. When the economy seems to be doing well, investors are less interested in the safety offered by government bonds like Treasuries and more open to risk. So they usually sell their bonds, which sends the bond price down and yield up. On the flip side, falling bond yields could mean the economy is facing some challenges, which means investors are more likely to dump risky assets like their tech stocks in favor of more security. Here's a little bite-sized snippet on why tech shares tank when bond yields rise - to help with some market. Hope this explanation was helpful!
Oct 12, 2021
@Jess225 Thank you a great start!