Inverse Relationship Between Bond Prices and Interest Rates
There is an inverse relationship between bond prices and interest rates. When prevailing market interest rates rise, newly issued bonds offer more attractive yields, making existing bonds with lower fixed coupon rates less valuable. Consequently, the market price of these existing bonds must fall to offer a competitive yield to new buyers. Conversely, when market interest rates fall, the price of existing bonds with higher fixed coupon rates increases.
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Primary Bond Market
Secondary Bond Market
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Bondholder
Bond Pricing
Interest Rate Risk for Bonds
Credit Risk for Bonds
Inverse Relationship Between Bond Prices and Interest Rates
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Inverse Relationship Between Bond Prices and Interest Rates