Bonds & Indexes

rustic1

Active member
243 1
Bonds &Indexes

Please can someone explain a little bit about why when US Treasury bonds have a sizzling rally it send yeilds to record lows?

Also why when bonds are strong the indexes are weaker?

Thanks

Rustic :LOL:
 

Skimbleshanks

1
2,325 16
I know almost nothing about bonds. However what I do know is that bonds and stocks usually work together and opposite - so when the big boys are buying bonds, they are selling stocks, and vice versa. Money flows from one into the other.

The only other thing I know is that out of bonds, stocks and gold, there is always one which is in a rallying stage. That's why the clever peeps switch their money between these three to consistently make even more dosh.
 

cassiopeia

Active member
133 2
rustic

This is nothing to do with the markets, it is how the mechanism of fixed bonds work. Most treasury bonds have a fixed regular payment (dividend) in terms of dollars, so if their price goes up, the yield as a % of that price will come down proportionately by the same amount.

%yield= 100 x total dividends over year/price of bond.

The name of the bond usually indicates what the original yield was when issued, you will notice these are quite high. eg. Treasury 9% in relation to present day interest rates.

Similarily for shares (although their dividends can vary) that is why many UK share yields are quite high, relative to a few years ago, it isn't because they have been increased in absolute terms the underlying share price has gone down and the dividend in £s hasn't been changed by as much.
 

rjay

Active member
122 0
Which is the best bond to keep an eye on, if one is looking for signs as to future Dow/S&P activity ?? The 10-yr Treasury ??
 
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