🐈

feel like no one explains "falling bond yields means higher prices" this statement feels regurgitated as a blind heuristic "if A goes down B goes up" intuitively a falling yield should imply a LOWER price. why pay more for less?

the reason the opposite happens is that it's future bond yields falling, meaning the present supply of bonds on the open market which have a higher interest rate are now worth more similar to how the job u currently HAVE is worth more when the job market is BAD

the heuristic for 10 yr bond yields is that higher indicates investor confidence and lower indicates lack of confidence bonds r essentially the credit card of the state & the most "trustworthy" lendee (since they can print)

e.g. investors outbid each other to lend money to the u.s. government going "no, borrow from me! i offer a better rate!" because they want that safe haven this increased demand for bonds both lowers the rate for new bonds & increases the price of existing ones on the open market

so b/c people r fighting each other for low interest rates that implies that there's nothing good to invest in this implies that expectations for equity returns are lower. or maybe they're higher but the expected volatility is too much given leveraged positions