No. of Recommendations: 0
I'm relatively new to understanding bonds, but I understand that as rates go up, prices for outstanding bonds should go down, in general. It seems almost assured that as the fed raises interest rates, government bonds should go down in price, in general.

However, given that we expect the fed to raise interest rates, and that the fed is doing it in a fairly predictable manner, shouldn't the bond price remain the same? One usually true principle in stocks is that if everyone knows the price will go down (or up) tomorrow, then it will go down (or up) today. Why shouldn't that be true with bonds? Wouldn't reasonably expected interest rate increases already be priced into bonds?

Or is there something I'm missing.
Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.