Navigating Bonds and ETFs
Similar to cryptocurrencies and equities, the bond market is often considered speculative. While fixed-income securities such as bonds are generally perceived as a safer investment, recent volatility has cast doubt on this assumption for some investors.
Bonds:
In general, the price of an existing bond exhibits an inverse relationship with its yield. When interest rates rise, newly issued bonds offer higher yields to attract investors, making existing bonds with lower fixed yields less attractive. Consequently, the prices of existing bonds with lower yields decrease to align with the new, higher market rates.
This is why ETFs such as
TLT tend to decline as interest rates rise.
Speculation:
Considering the possibility that the Fed is nearing its interest rate cap
USINTR, it may be worthwhile to take a closer look at such ETFs.
Currently, with the Fed rate at a 22-year high, the TLT ETF is trading near its original inception price from 21 years ago. This positions it within both a horizontal and monthly trend support zone.
When combined with the recovering yield spread and past market movements, one could speculate that a bond market recovery might be around the corner.
While speculation undoubtedly plays a significant role in these assessments, one could closely monitor the upcoming Fed interest rates decision to see if this is worthwhile
Bonds:
In general, the price of an existing bond exhibits an inverse relationship with its yield. When interest rates rise, newly issued bonds offer higher yields to attract investors, making existing bonds with lower fixed yields less attractive. Consequently, the prices of existing bonds with lower yields decrease to align with the new, higher market rates.
This is why ETFs such as
TLT tend to decline as interest rates rise.Speculation:
Considering the possibility that the Fed is nearing its interest rate cap
USINTR, it may be worthwhile to take a closer look at such ETFs. Currently, with the Fed rate at a 22-year high, the TLT ETF is trading near its original inception price from 21 years ago. This positions it within both a horizontal and monthly trend support zone.
When combined with the recovering yield spread and past market movements, one could speculate that a bond market recovery might be around the corner.
While speculation undoubtedly plays a significant role in these assessments, one could closely monitor the upcoming Fed interest rates decision to see if this is worthwhile
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