Rates spiked to the same level last year, I wonder if they will stick this time.

speaking of which, how do bonds work? value goes down, but the yield goes up… huh?

if the bond is higher yielding, why does the value actually go down?

if i buy a bond today at 5% and rate goes up next year to 6%, is my bond’s rate also increased? if not, i can see how my bond might be less valuable if i sold it before maturity, but if i held it to maturity, it would be exactly as described?

if tbill rates are going up, does that reflect inflation? if so, then my 5% bond is losing value vs inflation as well.

so i guess the questions are: are rates fixed on bonds and are immature bonds the bonds in question relating to price?

collary q’s: if people dump bonds, are rates automatically adjusted by the market? and how can you be a bear/bull on bonds when they have a fixed rate of return?

Bonds are sold with a coupon rate (fixed rate on the bond). Buyers bid prices of the bond up or down, to achieve their desired return rates.

Mortgage rates are generally tied to the yield on the 10-year bond. As bond prices decrease, the yield increases, as the coupon is fixed.

Blame it on the bond market, not the Fed.

10-year hitting 5.25 today … wish I’d bought some SRS at COB Friday. Condolences to those that own REITs or utilities today.

Oops – didn’t realize editing the post would move it down in the list. Sorry about that.

Alex- Doesn’t look real likely at this point.

drunkle,

It works like this. Say you buy a $100 bond that pays $5/year in income. It yields 5%. If a new bond out there is issued for $100 but pays $6/year, or 6%, then you won’t be able to sell anyone your bond that only yields 5%. You could if you sold it at a 6% yield, or $99. Thus, your bond resale went down as the yields go up.

So, when yields are high, many times, it’s better to buy bonds than stocks. Your yield is high, the bond value has more upside value, and you can achieve a higher rate of return. For example, to get a 10% yield, you can buy that same original $100-5% yield bond for $95. As yields come down, your bond increases in value to compensate for the lower yields.

Jeeman

So what causes the yield rate or rate higher? This increase in rate will definitely have a extremely negative effect on housing market. Have we seen any? Anyone?