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Increased demand for bonds tends to reduce the yield from holding bonds.
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Increased demand for bonds tends to reduce the yield from holding bonds.

User ItsCosmo
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23 votes

Answer:

Bonds have an inverse relationship to interest rates. When the cost of borrowing money rises (when interest rates rise), bond prices usually fall, and vice-versa.

At first glance, the negative correlation between interest rates and bond prices seems somewhat illogical. However, upon closer examination, it actually begins to make good sense.

User Ramuns Usovs
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