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Economics

Bond Price

Quick fact

A bond's price and its yield move in opposite directions: when the price goes down, the yield goes up, and vice versa. This is because the bond's fixed coupon payments become more or less attractive compared to new bonds issued at current rates.

Why this is interesting

You probably know that when interest rates go up, loans become more expensive. But did you know that the price of an existing bond actually drops when rates rise? Why would a bond that was paying a fixed amount suddenly be worth less?