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As the question says, what should we infer is happening when it's reported that the bond market is surging or rallying?

Is the implication that bond prices are increasing? Or is that yields are increasing, if so, which measure of bond yield?

StatsScared
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The price is going up. The bond you own can now be sold for more.

This means that the effective interest rate for someone buying it at this new higher price is falling and suggests that buyers are willing to accept a lower interest rate now than you were when you bought it.

Kate Gregory
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  • Thanks. What is confusing to me is that in the current environment where a bear market for bonds seems likely, why would bond prices be increasing? If investors or selling off bonds, shouldn't the price go down? – StatsScared Jun 15 '22 at 17:35
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    @StatsScared Are you talking about bonds "rallying" on one particular day? There are always ups and downs. See here for why markets don't move in a straight line. – nanoman Jun 15 '22 at 19:14
  • Why do you think a bear market is likely for bonds? – D Stanley Jun 16 '22 at 02:47
  • Thanks. So is the lesson here that when one hears that 'yields' are up, then that's negative for bonds given that bond prices are also up? Or am I confusing the concepts? – StatsScared Jun 16 '22 at 14:50
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    @StatsScared yields up means bond prices down – user253751 Jun 17 '22 at 13:29
  • "This means that the effective interest rate for someone buying it at this new higher price is falling and suggests that buyers are willing to accept a lower interest rate now than you were when you bought it." Can you elaborate on this? It wasn't clear to me what you were getting at in with your mention of effective interest rate. – StatsScared Jul 07 '22 at 18:22
  • let's say it pays $10 a [unit of time]. If it costs $100 that's 10%. If it costs $110 that is less than 10%. Or it will be redeemable at $200 some units of time from now. A person who buys something for 100 and redeems for 200 gets more "interest" than someone who buys for 110 and sells for 200. Whatever way a person gets compensated, a higher price means a lower "interest rate". – Kate Gregory Jul 07 '22 at 22:07