4 ms·
The opposite. Interest rates will likely rise which makes the prices of currently held bonds go down. Inflation is so high too that bonds may continue to have n
by thesausageking 5y ago
The opposite. Interest rates will likely rise which makes the prices of currently held bonds go down. Inflation is so high too that bonds may continue to have negative real interest rates for a long time.
- adamsmith143 5y agoQuestion: How does the price of a bond going down lead to negative real interest rates?
- rank0 5y agoHe’s saying that inflation will perpetuate negative real rates despite increasing bond yields as bond prices decline.
- thesausageking 5y agoYes, thanks. That wasn't written well. Bonds today have negative real interest rates and likely will going forward even as nominal rates rise. The only way this doesn't happen is if inflation drops quickly which seems very, very unlikely.
- rubiquity 5y agoIt doesn't. Bond prices going down will help close the gap between bond rates and inflation. When the Fed floods the market with its existing treasuries via QT, new treasuries will need to be issued at higher rates to compete.