How do interest rates affect bond prices?

Can you explain how interest rates impact bond prices?

Sure! When interest rates rise, bond prices typically fall, and vice versa. This is because new bonds are issued at higher rates, making existing bonds with lower rates less attractive.

Why do new bonds have higher rates?

New bonds have higher rates to attract investors when overall interest rates in the economy increase. Investors seek better returns, so issuers must offer higher rates.

What happens to bond prices if interest rates decrease?

If interest rates decrease, bond prices generally rise. Existing bonds with higher rates become more valuable as new bonds are issued at lower rates.

Are there any exceptions to this rule?

Yes, there can be exceptions. Factors like credit risk, market demand, and economic conditions can also influence bond prices beyond just interest rates.

How can I track interest rate changes?

You can track interest rate changes through financial news websites, central bank announcements, and economic reports that provide updates on monetary policy.