Why Bond Yields Are a Key Economic Barometer | WSJ

U.S. government bond yields aren’t just a barometer of the economy, they also influence the cost of borrowing, from mortgages to student loans. WSJ explains how they work and why they’re so crucial to the economy. Photo illustration: Tom Grillo/WSJ
More from the Wall Street Journal:
Visit WSJ.com: www.wsj.com
Visit the WSJ Video Center: wsj.com/video
On Facebook: / videos
On Twitter: / wsj
On Snapchat: on.wsj.com/2ratjSM
#BondYields #WSJGlossary #WSJExplains

[@NicholasBall130]

It is a government inspired crisis this time. The Treasury have to sell Bonds to cover the trade imbalance and the government spending imbalance. In order to sell them they have to raise interest rates and the old long-term, low risk, low interest, AAA investments (including Treasury Bonds), held by the banks (often due to government regulatory policy), become next to worthless. The next milestone is the 15th when the government issue a new batch of Bonds. I have approximately 350k stagnant in my portfolio that needs growth. What is the best way to take advantage of this downturn?

[@EleanorBaker474]

Indeed, you are correct! Economic downturns offer numerous prospects for ordinary individuals to create wealth from the ground up. Nevertheless, seeking guidance from an investment planner might be necessary if you desire a more assertive return.

[@StocksWolf752]

I’m a contractor, and my job doesn’t permit me the time to properly analyze my holdings/evaluate stocks myself, so I’ve had a fiduciary actively restructuring my portfolio for the past 7 years now to match the present market condition and that’s how I’ve been able to stay afloat, knowing when to buy and sell…maybe you should do the same.

[@StacieBMui]

Could you kindly elaborate on the advisor's background and qualifications?

[@StocksWolf752]

The advisor that guides me is Sonya lee Mitchell, most likely the internet is where to find her basic info, just search her name, She's established.

[@Hotshot2k4]

I think you have a few things backwards. In the first place, the government does not _have_ to sell bonds to cover trade imbalance, it can literally print money if it wants. It chooses to borrow more in order to keep inflation down. In order to make them attractive to buyers, they have to offer higher interest rates on the bonds, so that more people will want to buy them and take money out of the economy, which generally cools the economy and reduces inflation. The result is indeed the value of older bonds issued during low interest rates losing value, but once interest rates come down, the government will issue bonds with lower rates, and the current high rate bonds will start to sell at a premium. In other words, have faith; when interest rates normalize, your bonds will likely regain much of their value with time. I'm not a financial advisor by any means so this is not financial advice, but personally I'd be hesitant to get rid of any held bonds before the federal reserve interest rate comes down again, unless I really needed the money.

[@shehanism]

Great video showcasing the relations between expansionary and contractionary monetary policy essentially.

[@bycooltimes6606]

Thanks for watching Don't forget to hit The subscription button WhatsaP±𝟺𝟺𝟽𝟺𝟶𝟺𝟾𝟷𝟸𝟿𝟸𝟿

[@CatherineWilson8]

Even if bond yields are rising while stock prices are decreasing, the markets are still skeptical whether the Federal Reserve will stick to its goal to raise interest rates until inflation is under control. As I'm still debating whether to sell my $401k worth of equities, what is the best way to profit from the current down market?

[@KevinClarke9]

The best market strategy at the moment is working with a respected investing coach. I've been in touch with a coach for a time now, mostly because I lack the depth of understanding and mental toughness to deal with these ongoing market conditions. During this recession, I made about $700k, proving that the market is more complicated than most people think.

[@ritalorrigan]

@@KevinClarke9 Due to the significant falls, I need advice on how to rebuild my portfolio and develop more successful tactics. Where can I find this coach?

[@KevinClarke9]

I have stayed away from all of the issues that the erratic market presents. Today, reading, research, patience, and seeking guidance when necessary are the greatest ways to break into the market. I merely copy Dawn Maureen Humphrey, a CFA, whose actions I witnessed on Bloomberg Business News because I am unable to handle my portfolio owing to the nature of my profession. Ever since, everything has been easy.

[@ritalorrigan]

@@KevinClarke9 Wow! I looked up Dawn Maureen Humphrey complete name online just out of curiosity and was pleasantly surprised by her credentials. Thank you for sharing.

[@abcdef8915]

​@@KevinClarke9has anyone told you that you look like Scott Morrison. The resemblance is uncanny.

[@chrismillson2779]

The majority of my holdings ($650K) are Nasdaq, Apple, and Tesla stocks, respectively. I got in early but am undecided whether to sell or purchase back at reduced prices owing to the present market condition.

[@Robertgriffinne]

Focus on two key objectives. First, stay protected by learning when to sell stocks to cut losses and capture profits. Second, prepare to profit when the market turns around.I recommend you seek the guidance a broker or financial advisor.

[@Natalieneptune469]

@@Robertgriffinne Whichever option you choose, be careful to seek advice from a trustworthy investment advisor. I do business with one, and she has helped me get a better handle on the stock/ETF market throughout this upheaval.

[@Robertgriffinne]

@@Natalieneptune469 Hello, how did you handle it? I believe I require an advisor after reading these comments about hiring them. Simply said, I don't want to commit errors that will significantly harm me.

[@Natalieneptune469]

@@Robertgriffinne Susan Agnes Hancock is the analyst/investment-adviser. She has been of great help and her tutelage has brought me to a higher understanding of profit generation. You can look up her name on the net for her page and reach out. Understands the job perfectly

[@chrismillson2779]

@@Natalieneptune469 This recommendation literally came at the right time, I dipped by $11k in stocks last week alone. Its crazy! I just looked up Susan Agnes Hancock online and researched her accreditation. She seem very proficient & I wrote her detailing my Fin-market goals . Information they say, is power. Thanks for this.

[@kigletmary56]

The Market have been suffering over the past month, with all the three indexes recording losses in recent weeks. My $400,000 portfolio is down by approximately 20%, any recommendations to scale up my returns before retirement will be highly appreciated.

[@ticynara1]

Find stocks with market-beating yields and shares that at least keep pace with the market for a long term.For a successful long-term strategy | recommend you seek the guidance a broker or financial advisor.

[@Lettogle109]

I agree. Based on personal experience working with an investment advisor, I currently have $385k in a well-diversified portfolio that has experienced exponential growth. It's not only about having money to invest in stocks, but you also need to be knowledgeable, persistent, and have strong hands to back it up.

[@gracegomez109]

Glad to have stumbled on this conversation. Please can you leave the info of your investment advisor here? I'm in dire need for one.

[@Lettogle109]

My advisors is Valerie Jean Zwosta. Thank me later.

[@gracegomez109]

Thank you for this amazing tip. I just looked the name up, wrote her explaining my financial market goals and scheduled a call

[@Mcllwain]

Munger and Buffett have both achieved an incredible feat with Berkshire. They've turned thousands to billions, and have made a lot of people wealthy in the process. I really saw the potential of the stock market by reading Berkshire's annual letters. I recently sold my $674k apartment in the Bel Air area and I'm hoping to throw it into the stock market. I just don't want to lose everything.

[@sherryie2]

Most newbies either do not understand the power of compound interest, or are just impatient. For the average Joe, however, I think it is just best to invest in the S&P 500, and just wait, which is reliable, albeit extremely long-- lots of years. Or just use a professional analyst and speed up wealth creation. Most people underestimate the power of the latter.

[@tonicruger]

@@sherryie2 It's a delicate season now, so you can do little or nothing on your own. Hence I’ll suggest you get yourself a financial expert that can provide you with valuable financial information and assistance

[@kurttSchuster]

@@tonicruger I actually subscribed for a few trading courses but it didn't help much, been getting suggestions to use a proper financial advisor, how did you go about touching base with your coach?

[@tonicruger]

@@kurttSchuster I absolutely dislike giving such advice because every person's situation is different. However, there are a lot of independent advisors you might look into. "NICOLE DESIREE SIMON" and I have been working together for nearly four years, and she is excellent. You could proceed with her if she satisfies your discretion. I support her.

[@kurttSchuster]

@@tonicruger I just checked her out and I have sent her an email. I hope she gets back to me soon.

[@JustMe-ro1be]

Love these short educational videos. Great stuff.

[@PavanKumar-ft5hi]

Good explanation. Thank you.

[@bycooltimes6606]

Thanks for watching Don't forget to Hit the subscription button WhatsaP±𝟺𝟺𝟽𝟺𝟶𝟺𝟾𝟷𝟸𝟿𝟸𝟿

[@dbake5021]

Being able to watch this video and know all of this is such a good feeling. Who knew college education is so beneficial.

[@kokolada4272]

bro i understand with no college i hope thats not ur maximum knowledge

[@ThormanBoucher]

Fed reserve and the treasury is not bothered about stock capital market. They are more concerned about the treasury bond market. They fear the bond market may become dysfunctional and illiquid. Bond yields are one of the important parameter that influences stock market. All stock pundits fail to mention how the bond yields influence stock market. My main concern now is how we are going to achieve all of that given that the market has been a mess for most of the year. I already lost $23,000

[@GarrettDills]

Me too. I want to build wealth through taking the time and effort to consistently invest but i lack good knowledge and strategy to outperform the market, yielding good returns. I have $60k i want to transfer into an s&s isa but its hard to bite the bullet and do it.

[@DanLeahfort]

Avoid too-good-to-be-true scam schemes. Seek advice from a fiduciary counselor they provide personalized advice to individuals based on their risk appetite, placing them among the best of the best. There are bad ones, but some with good track records can be very good.

[@RachelBrinkmeier]

@@DanLeahfort I agree. Based on firsthand encounter with a fiduciary counselor KATHERINE DUFFY BURKE, i have $385k in a well diversified portfolio which has grown by 3x with compounding, venturing doesn’t necessarily boil down to money but you also have to be informed, be patient and back it up with good hands

[@AveryFetherolf]

@@RachelBrinkmeier wow thats a huge milestone. Please how can i reckon with such skillset? i want to grow my emergency funds of approximately $57,000 advantageously

[@colbyryann2665]

@@RachelBrinkmeier I searched for Katherine using her full name and found her webpage, read her resume, education, qualifications and it was really impressive. She is a fiduciary who will act in my best interest. So, I sent a message and I hope she replies soon

[@marcobonomo8761]

Tom Grillo well done for the excellent animations!

[@filippobaroli7206]

Really happy to have understood everything, all the terms and technicalities, in the video. I thought doing a bachelor’s degree in economics was a wast of my time but in these cases…it shows me it was worth it!

[@bycooltimes6606]

Thanks for watching Don't forget to Hit the subscription button WhatsaP±𝟺𝟺𝟽𝟺𝟶𝟺𝟾𝟷𝟸𝟿𝟸𝟿

[@3rkid]

If it makes you feel any worse, I also understood everything in this video and do not have a 4 year degree at all.

[@OJGLOVE]

@@3rkid 🤣

[@kytv9000]

@@3rkid Yeah, his logic was really strange. A 4 year economic degree didn't make him understand these basics but he's proud that it helped him to understand this video today. What??

[@carknower]

But it is a waste of time.

[@alvaroarturozaratesuarez1574]

Excellet video, I've already undestood the importance of bond yields.

[@Josh-ev3tw]

Thanks for the economic education.

[@bycooltimes6606]

Thanks for watching Don't forget to hit the subscription button WhatsaP±𝟺𝟺𝟽𝟺𝟶𝟺𝟾𝟷𝟸𝟿𝟸𝟿

[@MIchaelGuzman737]

We are approaching the end of the long-term debt cycle. In my opinion in this phase, holding debt assets are super risky including bonds. There will be definitely devaluation of currencies which cuts the purchasing power of currencies. This defeats the aim of investing (preserving purchasing power & achieving growth)

[@elizabethyork590]

I've spent the last few years cleaning house, getting rid of all debt. Now i need to get my investment mindset right, I want to start saving for my golden days. I need a sincere and honest advise on this.

[@Americanpatriot723]

The economic hardship, inflation, recession, unemployment and the loss of job caused by covid pandemic is enough to push people into financial ventures. Be that one guy that keeps cool and uses a bear market to your advantage and capitalize long term, by compounding your investments today. Who cares if prices drop more. Know the value of what you own and stay the course. When you're pushing against the crowd and sticking to a disciplined strategy you're going to come out on top of the stack.

[@kashkat987]

@@Americanpatriot723 How can i take advantage of the bear market . I have always thought the stock & crypto market is a fool game just like going to the fair/carnival and trying to win a prize.

[@Americanpatriot723]

@@kashkat987 YES. Building wealth involves developing good habits like regularly putting money away in intervals for solid investments. The crypto market has plenty of opportunities to earn which I myself took advantage of.. I made my first million from going diverse, mainly stocks, ETFs and bonds. It’s a long term plan for me so I invest and re-invest credits to my Financial Advisor *Theresa Mary Chamblee* you can look her up if you care supervision.

[@kashkat987]

@@Americanpatriot723 Thanks i will make my research & also lookup your advisor on the web. I really appreciate the response, you have no clue how much it means.

[@NiteshGupta_techno]

Great explanation

[@bycooltimes6606]

Thanks for watching Don't forget to hit The subscription button WhatsaP±𝟺𝟺𝟽𝟺𝟶𝟺𝟾𝟷𝟸𝟿𝟸𝟿

[@sanansojar365]

Lovely explanation

[@glenmj1]

Thank you

[@ritzkola2302]

Four Economic sectors. Primary, Secondary, Tertiary, Quaternary. Is there a chart or website or channel, that breaks down WHAT time of year each sector is at its strongest? As well as a chart that shows historical data Year by year for each sector performance?

[@jackbrady9738]

When you derive every possible capital investment you could possibly make, the one which is the ‘safest’, is the bond from the country with the strongest government (US). All investments are then analysed to that yard stick. That’s why it’s vital.

[@HugoMurray221]

Great Stuff!

[@twenties3154]

Nice content. Thanks

[@user-vx3rf7du7b]

Make more videos about investments please. It's really interesting theme

[@kytv9000]

I'd watched so many bond-yield-price videos and thought I'd understood it. Till today I know I missed the info at 2:24. I did not know that the "yield goes up" also applied for the existing bonds, as their yield is calculated on the current price (lower) instead of the face value.

[@joe55514]

So the yield stays the same but goes up relatively to the now lower price price ?

[@c.e508]

@@joe55514 Yes

[@c.e508]

Or to be more specific, the coupon stays the same.

[@MrRight-xc5nw]

If the bond was already issued the yields stay the same but the bond will decrease in price if the yield goes higher and increase in price if the yield goes lower. Which makes since, I would pay a higher price for a better yield. Like buying a bond from 1995 in 2010. You would want that 5 percent apy over 0.1 percent.

[@MrSupernova111]

Yes. This is never explained in videos about bond pricing.

[@juampy725663]

Nice to know and learn. Thanks so much for explaining this. It rises the cost of borrowing money, paying a mortgage for a house will be more expensive this year. So basically, for the sake of cooling down inflation the people who are paying for their houses will pay the price? Cheers.

[@santyv9466]

Well this is a great educational video ! Hats off to wsj. But I still don't get how higher bond yields can rise stock prices simultaneously because if cash flows have to be discounted at higher rate it will reduce the value of stocks theoretically right ?

[@larryjones9773]

Two factors impact stock prices: 1. discount rate, as you mentioned. 2. changes in cash flow (INCREASE, in this scenario). If the cash flow outweighs the discount rate impact, then stock prices will increase. If the cash flow does not outweigh the discount rate, then stock prices will decrease. Bottom line: stock prices can move either direction, when bond yields rise. p.s. It took me an hour to figure this out, as I had the same question.

[@santyv9466]

@@larryjones9773 Great 👍 Thanks.

[@Bryanbkk]

Today this makes more sense than ever

[@imankumardutta]

A huge percentage of North American energy companies are losing money. Probably the worst investment is a junk-bond index fund .

[@bycooltimes6606]

Thanks for watching Don't forget to hit the subscription button WhatsaP±𝟺𝟺𝟽𝟺𝟶𝟺𝟾𝟷𝟸𝟿𝟸𝟿

[@adrian2004tgm]

What do you mean at 01:36 “the fixed amount a bond pays each year AFTER its maturity date” you mean, BEFORE?

[@alparslankorkmaz2964]

Nice video.

[@bycooltimes6606]

Thanks for watching Don't forget to hit the subscription button WhatsaP±𝟺𝟺𝟽𝟺𝟶𝟺𝟾𝟷𝟸𝟿𝟸𝟿

[@gino3286]

Thanks for the exceptionally interesting video There is one aspect that I don't understand very well though Why the interest paid on short-term bonds is usually higher than that paid on bonds with a ten-year maturity Shouldn't it be the other way around?

[@kbx4315]

This also applies to stocks - higher risk free rate impacts Waco which is a key input to estimate a company’s value based on their future cash projection. This is why all high growth stocks are getting crushed yet core tech stocks with hefty cash balance and free cash flows are more stable than those with high growth expected companies

[@MrSupernova111]

What's a Waco?

[@de3thre3]

@@MrSupernova111 weighted average cost of capital, essentially the rate at which you discount a company while valuing them. A higher discount rate = lower valuations

[@MrSupernova111]

@@de3thre3 . Oh. Thanks!

[@Rittley]

OK...They do not explain why bond yields mimic interest rates. Does this mean that the Fed basically controls bond yields by setting the interest rates? Is it possible that bond yields and interest rates move in opposite directions too?

[@bycooltimes6606]

Thanks for watching Don't forget to hit The subscription button WhatsaP±𝟺𝟺𝟽𝟺𝟶𝟺𝟾𝟷𝟸𝟿𝟸𝟿

[@ark_crimson]

Bond yields are the minimum yield you can get with theorically "zero risk". So if a company wants to offer a bond, it needs to offer higher yields than the government offers, as there is a higher risk involved. This basic interest rate also has impacts on the costs of borrowing for banks. And if they have to pay more on one side, they will also ask for more in order to offer loans to consumers and corporations. So it is all connected.

[@fintechs9446]

@1:57 did you forgot to mention "before the bond matures" ?

[@adrian2004tgm]

Came here to see this. Definitely before it’s maturity date lol

[@Valentine350z]

Except the fact that the FED shouldn't have stopped its interest rate hikes of 2018. They were already late with hiking up the interest rates (but who can blame them, if their pockets are getting sweetened by corps) and now the bubble is so big, that WHEN it bursts, the 2008 recession will look like a walk in the park compared to what's coming.

[@bycooltimes6606]

Thanks for watching Don't forget to hit the subscription button WhatsaP±𝟺𝟺𝟽𝟺𝟶𝟺𝟾𝟷𝟸𝟿𝟸𝟿

[@SuperParkerBrothers]

Dude come on, this is conjecture. You don’t understand what happened in 2007 if you genuinely think that.

[@Valentine350z]

@@SuperParkerBrothers the housing bubble of 2008 has been part of my MBA thesis. We have also dissected the scale & financial aftermath of the last recession during the MFIN. Trust me, I perfectly understand what happened and have a very good understanding of what is going on now. My comparison to the 2007 was not in the underlying cause but to the scale and damage that the coming recession will have.

[@user-dw1zb3fh5n]

What if I told you…It never pops.

[@Valentine350z]

@@user-dw1zb3fh5n One could argue that, but what is meant by the bubble bursting is when the overinflated market value (in comparison to the cumulative book value of all the companies) drops extremely quick, over a short period of time, causing a mass sell-off and inevitably dropping far below the book value.

[@Kirmo13]

WSJ (5 million subscribers) in 2022 posts a video in 720p No folks, this is not a joke

[@mariaproust4051]

Arent coupons rate also Discounted with ytm?

[@Discovery_and_Change]

2:04 "If the economy is doing well, interest rates may go up." So why are stocks going down and why is the news saying future profits are going to go down, as interest rates continue to rise in 2022, if higher rates are supposed to be indicative of a good economy?

[@algae_rhythms]

Because they are clueless

[@MrSupernova111]

Higher rates aren't indicative of a good economy. Productivity, low inflation, and low unemployment are indicators of a good economy. Unfortunately, all those things are tied together so when one goes out of whack it affects the others. Its a balancing act.

[@JohnSmith-bm6zg]

This is better than most content. But on a deeper level this still doesn’t explain anything. A word on the logic of risk might help.

[@Vhalan53]

Why buy bonds over a high yield savings account?

[@MrJwod]

it would be nice to know the % of people holding bonds to maturity. Or do most speculate over the bond price by anticipating interest rate direction?

[@alexsloan4976]

Yes.

[@alexsloan4976]

Yes to both

[@richardthelionheart5594]

Never speculate on where and when bonds will make a move. Buy the market in live time. Keep buying the market in live time and it'll all work out. I have a large individual issue muni bond position and I always hold to maturity.

[@paulko3753]

are they referring to the federal fund rate when they are discussing "short-term interest rates"?

[@richardthelionheart5594]

I think so. The overnight rate.

[@DukeVikings225]

The only criticism I have of this video is the image used says "Treasury Bill". Treasury Bill debt obligations have very short term maturities ranging from 4 to 52 weeks.

[@chesterjinn5266]

in the context of 2:04, what does intrest rate mean?

[@cvrajendra]

Sam Goldfarb is a genius

[@bycooltimes6606]

Thanks for watching Don't forget to hit The subscription button WhatsaP±𝟺𝟺𝟽𝟺𝟶𝟺𝟾𝟷𝟸𝟿𝟸𝟿

[@Davidl422]

Interesting

[@krisb-travel]

2:22 “when the price goes down the yield goes up” is she referring to yield based on paying the new price of $922? Eg the coupon is still actually 4% but because the bond only costs $922 now that actually works out at 5%?

[@krisb-travel]

That illustration confused me too, I assume it’s wrong and infact what really happens is what you mentioned

[@AbuSous2000PR]

ok but bond yield is being distorted

[@keysame2309]

Are bonds owners usually making more money from yield or rates

[@flacocruz6499]

I have couple bonds how can I cash it out they are from 1922

[@utkarshmaghav708]

Correct me if I am wrong. higher bond yields means fed want from businesses not to spend on the economy during high inflation. They just want to absorb excessive liquidity from the market to tame inflation. so high yields attract businesses or investors during these harsh times when the market is down. Is it correct?

[@ooluta7578]

No, that's wrong.

[@mrretired2715]

@@ooluta7578 whats correct then

[@alexewo180]

The example says the stock market rises with a rise in yields and yields rise with a rise in interest rate. How do people keep on investing in stocks instead of the dollar in a risk off scenario ? Like isn't the stock index market a negative correlation to the dollar index ?

[@yuujilee2778]

how to buy it for foreign/non resident，i dont have tax number

[@ninovalera4994]

I watched this twice and I still don't get it

[@Chessmapling]

what don't you get?

[@DKTrue]

Key takeaway: If bond yields rise, so do interest rates. If interest rates rise, stock prices, especially tech stocks, go down.

[@Allen_Leigh_Canada]

me either.

[@Hao-wi4ly]

@@DKTrue you missed the part where she said sometimes you see bond yields and stocks both going up at the same time 2:38

[@mindgoesbodyfollows]

She didn't explain the inverse relationship between price of a bond and yield very well either

[@HadjaHeatherBarry]

We are having a yield here and there is a safe investment and very confident with my accessory yield.There is a fed that will raising it to0. The economy has grow older and it raises well.

[@maximumliberty]

How does a strong economy create price inflation? I thought it was expanding the money supply that does that.

[@packetflow]

"Bond Yields are the barometer of the economy, they are extremely important to the US and Global Economy, Bond Yields affect everything from cost of a mortgage, to the cost of borrowing for a business, if your borrowing money it's going to be determined to a large extent by US Government bond yields." - Please read this over 1000000000 times until it actually sinks in, THEN REALIZE THAT THE FED HAS BEEN PRINTING MONEY OUT OF THIN AIR TO SUPPRESS THESE RATES IN AN ATTEMPT TO ENTICE PEOPLE TO TAKE ON MORE AND MORE AND MORE AND MORE DEBT... Just think about that for a second, "The displacement of risk, is the risk not being accounted for."

[@AriadyPutra]

But when the cost of borrowing increases, wouldn't the companies need to increase the price of products to maintain their profit margin, thus more inflation. Honestly confused

[@bycooltimes6606]

Thanks for watching Don't forget to hit the subscription button WhatsaP±𝟺𝟺𝟽𝟺𝟶𝟺𝟾𝟷𝟸𝟿𝟸𝟿

[@javierlo9735]

As cost of borrowing increases, companies can either increase price of products / fire employees to maintain their operations. That leads to unemployments + the more expensive things are the lesser the spending from consumer, economic growth would halt which in turn will half the inflation rate. Hope this helps :)

[@VictorHugo-wf6bj]

Price elasticity is what you’re talking about= How much can a corporation increase the price of a good before people stop buying it. But what we’re seeing so far is that companies have increased the price of goods but people keep buying them, therefore making inflation worse. However, there will be a point where prices increase to such a point that consumers stop buying as much of the product, therefore decreasing demand, therefore helping the supply/demand problem. This would technically help reduce inflation.

[@saiparepally]

Per basic economic theory*, the technical answer is that prices and profit margins (before accounting for interest / taxes) are a function of industry structure/competition, business model / unit economics, and customer value propositions (basically firms will charge as high a price as they can get away with that won’t reduce their overall profits). Capital structure (whether a firm uses debt or equity to finance the firm) will ultimately affect the (after-tax) bottom line but is an independent decision. It is always favorable to use as much debt as the business can support because it boosts equity returns in a tax-advantaged way. If interest rates rise, the amount of debt a business can theoretically support is lower and they will work to reduce their debt rather than raise prices (since if they could’ve raised prices before they already would have). Based on this, you can also see why the economy would theoretically slow when this happens - businesses must deleverage when this happens, so money is flowing towards debt repayment rather than business reinvestment. Further, business expansion is now more expensive as interest rates are higher (if you finance with debt, you pay more interest - financing with equity always more expensive than debt). To boot - there’s also overindebted firms who will struggle / go bankrupt in the higher interest rate environment, presenting a further drag on the economy. *not saying basic in a condescending way - I don’t have an advanced degree in economics, just an undergrad one so I can only speak to the models I learned there. I think there are more elaborate/ realistic models that probably put a finer point on this.

[@leetaiming64]

if the bond yield is affected by the interest rate which is adjusted by the fed, would it be safe to say that we can just look at the interest rate and ignore the bond yield when predicting economy performance?

[@GoldenAura32]

The short answer to your question is yes.

[@leetaiming64]

@@GoldenAura32 alright. thanks man.

[@MrSupernova111]

No one can predict economic performance. You'd need a crystal ball for that.

[@leetaiming64]

@@MrSupernova111 do you have one

[@johnnyk123]

They kind of glossed over the part about when interest rates rise the value of your bond goes down, but then the yield goes up. Why is that?

[@pcuimac]

Most of that "Inflation" was a) price increase in commodity markets and b) price gouging by the industry. It's not that consumers during COVID lockdowns had consumed more. The working class struggles to survive. How can they create demand? People should watch Chris Martensen's lectures about the bond price death spiral.

[@Anirudhchakraborty]

But how is raising bond yields affecting supply chain. They are just trying to destroy demand and create a market crash at which point the cycle starts all over again. We need to focus not on paying off student loan debts and focus on creating better employment avenues.

[@DarryusLim]

interesting

[@satriojumeneng7055]

Skyrocketing inflation ...... Why not blaming money printing instead ??

[@jorgeharmstrong]

Thanks for the Kool-Aid

[@timberwolfe1645]

So finally we can get the risky and flimsy buyers out of the market. I'm trying to have an affordable life bit dont like to borrow what I cant afford. I need affordability

[@atishayritulpatwa7235]

Guys why do you make small videos.

[@manrajgill5749]

Why do Bond yields and prices have an inverse relationship i thought interest rates on bonds were fixed not variable?

[@phantsa]

That is the difference between the coupon rate and the yield. Yield is the coupon rate as a % of the current price, so it varies depending on the price

[@MrSupernova111]

The video explained that as rates increase in new bonds, existing holders jump ship into the new bonds with higher rates and put downward pressure on older bonds (pricing) which are an overwhelming portion of the market.

[@ericanderson3534]

can I risk subscribing to this channel?

[@bycooltimes6606]

Thanks for watching Don't forget To hit the subscription button WhatsaP±𝟺𝟺𝟽𝟺𝟶𝟺𝟾𝟷𝟸𝟿𝟸𝟿

[@anonimuse6553]

There is at least some missing info. If a person has a 30 year bond and is sits for 25 years, is the interested compounded over time? Where does one buy these bonds? where do they sell them? where are they traded?

[@bycooltimes6606]

Thanks for watching Don't forget to Hit the subscription button WhatsaP±𝟺𝟺𝟽𝟺𝟶𝟺𝟾𝟷𝟸𝟿𝟸𝟿

[@ark_crimson]

Yes, it is compounded, but it can't be higher than the face value, which is the value you will receive when it reaches maturity. So there's always a "discount" if you want to sell it before maturity. And this discount depends on the difference between the yield this bond offered when it was issued and the current available yield. There is something called a primary market, where you buy the bond directly from the government when it is first issued, through auctions. And there's a "secondary market" where these bonds are dailly traded between investors and corporations (including banks). You can ask your bank about how you can buy one.

[@dragaashenoak5338]

No, the interest does not get compounded by itself. You get a fixed amount of interest for those years. To make it compound, you need to invest that interest again by yourself.

[@chrisdeantonio1498]

I still don’t quite understand a fundamental concept here. If bond yields are rising, that means the price is going down (ie people are selling treasuries). If we think we’re headed to a recession, why would people be selling treasuries? Are they just fleeing to cash?

[@Setsero93]

A 5 min video is not enough to explain this topic.. not to mention when those 5 mins are used poorly. Go watch Ray Dalio "how the economic machine works" thank me later

[@cccsss123]

true

[@amitmalpani6899]

thanks, was looking for the same in the comments.

[@TOMinPDX]

Stupid comment. This video is specifically discussing bonds. Dalios video is about how the broader economy works. Thus this video is only 5 mins on one subject, Dalios is 30 mins on several subjects.

[@Amelia-Elizabeth]

It's amazing to see AMC doing well after all the doomsday analyses from naysayers. The stock market is a device for transferring money from the impatient to the patient - warren buffet. It's good to remind people of this right now; you buy on fear and sell on greed or just hold through it all for the long term. It’s easy but lots of people forget.

[@paulpreston2199]

THE BEST DECISION I EVER MADE IN MY LIFE WAS INVESTING IN FINANCIAL MARKET. TRUST ME GUYS, IT PAYS!

[@garthwalta]

You are right, to be a successful person in life requires him or her of hard work and time

[@garthwalta]

Investing in cryptocurrency is the best way of getting ahead to build wealth, investing remains a priority. The stock market has plenty of opportunities to earn a decent Payouts, with the rights skills and proper understanding of how the market works, i pray that anyone who reads this become successful in life.

[@trevorphilips5104]

Exactly, at the moment bitcoin is the best and profitable coin to buy and invest in.

[@rekiahills5854]

Crypto trading is very profitable when you trade well.

[@florinstrava3896]

Many of us don't know where to invest our money so We invest it in wrong places and to the wrong people

[@positiveandstrong]

It's incorrect to conflate a bond's coupon rate with its yield. These are two different metrics, and using these interchangeably is what's confusing.

[@MrSupernova111]

Aren't they essentially the same thing?

[@robertoguerra5375]

If the economy goes up, the rates go up… but this is not an automatic decision by the market… this is a professional decision by the federal reserve, as a reaction to inflation, which could be on time, or could be late… please anyone correct me if I am wrong.

[@timvanandel237]

$40 annual coupon payment on a $1,000 bond would drop to $800 if interest rates rise to 5%. $40/.05= $800

[@richardthelionheart5594]

I don't think so. U still get the yield of the original coupon if u hold to maturity.

[@MrSupernova111]

A bond is a contract with a fixed payment. You don't extra yield when rates change. Your sunk cost is still $1,000. You're trying to roll multiple bond contracts into one. Not how it works.

[@BR-hi6yt]

This is a TV documentary type of thing.

[@grownupgaming]

If Fed cuts the fed funds rate, bond yields should decrease. However, since the economy is so strong, no one wants to tie money up in bonds, so shouldnt bond yields increase instead? Confused.

[@HadjaHeatherBarry]

I do not borrow money,I am a Money maker as I am extremely wealthy.Thanks !

[@abuhussain1285]

the reporter mentions when an economy is doing well Interest Rates go up. In recent years only been going down.

[@puravida5683]

If the Fed really wanted to do something positive, it would require all banks to maintain adequate reserves!

[@htleong4790]

That's assuming that there are buyers

[@osark2487]

The last note is the funniest thing I have heard in economics lately. Higher bond yields cooling the economy and bringing down inflation in the long term.... Unless a central bank tries to save the treasury from going belly up, going into the secondary market and bidding on government debt. Or just the attempt of it, like Japan this week

[@MrSupernova111]

How will the treasury go belly up?

[@Someone-lc6dc]

Why would the interest rates go up when the economy is doing well?

[@HelloWorld-pc3ku]

Economics rise is just temporary due to feds stimulus, you think this will last long?

[@ep4314]

and..."just like that".

[@revvedrey]

So basically bonds are to attract people not to borrow too much from a bank, and inflation won't rise?

[@george6977]

🙂

[@captnhuffy]

Stop confusing cause and effect.

[@bycooltimes6606]

Thanks for watching Don't forget to hit the Subscription button WhatsaP±𝟺𝟺𝟽𝟺𝟶𝟺𝟾𝟷𝟸𝟿𝟸𝟿

[@beginneronlineworld9050]

This should be a ad why we don’t need central banks intervention in the economy

[@TreeTop9]

A yield inversion is more of a self fulfilling prophecy than a key economic barometer. It doesn't cause recessions by any means. It's sentiment...and the sentiment was incorrect this time.

[@Mr-sweeny]

Stocks are falling and bond yields are rising, but markets still don’t seem convinced the Federal Reserve will pursue plans to keep increasing interest rates until inflation is under control. I'm still at a crossroads deciding if to liquidate my $117k stocck portfolio, what’s the best way to take advantage of this bear market?

[@PatrickLloyd-]

Remember that investing in the stock market carries risks, and it’s important to do your own research and consult with a financial advisor before making any investment decisions.

[@ubaldoferreira8227]

Your. Life. Monday free.

[@maximvs3834]

The monetary system is anthropocentric and unnecessary. Post scarcity is the solution.

[@bycooltimes6606]

Thanks for watching Don't forget to hit the subscription button WhatsaP±𝟺𝟺𝟽𝟺𝟶𝟺𝟾𝟷𝟸𝟿𝟸𝟿

[@nakosimpson7459]

Imb

[@hieuhuynh3261]

why economy doing well then interest rate going up, it gotta be opposite

[@solb101]

This video emphasises the role of the fed but fails to explain the pernicious influence of government spending on bond risk and interest rates.

[@warren3117]

The primary cause of inflation is printing money. If raising interest rates alone would lower inflation then Argentina wouldn't suffer from it. Interest rates in Argentina are over 100 percent. Yet their rate of inflation is over 100 percent. Argentina has printed too much money. As did the US. Especially during the pandemic.

[@AcesizOfficial]

💎💎💎