Bonds & Indexes


Active member
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?


Rustic :LOL:
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.
...indeed...always helps to keep an eye on bonds....if one is in stocks...

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.
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 ??