Rates and prices move in inverse fashion with bonds. If you buy a bond for $100, and it pays you a fixed payment of $5, the yield is 5%. If you have to pay $200 for it (the price doubles), suddenly you're only earning 2.5% (the rate goes down). Conversely, if you pay $50 to earn $5 (price dropped), you earn 10% (rate increased). Simple.
The image to the above is the 10-year Treasury Note over the past year (end of February 2007 to today).
Monday, February 25, 2008
Basic Bond Info
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