| The current question that is being asked in the | | | | components. These components are credit risk |
| stock is why is the bond market selling off. While | | | | and interest rate risk. Bonds are held by |
| there is a number of excuses there are real | | | | company's and governments. When their credit |
| reasons this is occurring. First and foremost there | | | | rating is lowered their bond prices will significantly |
| are more seller than buyers. | | | | decrease. This is because there is more risk to |
| Most financial professions over look the simple and | | | | the company that issued the bond will default. |
| straight forward answer. They often focus on | | | | Usually this does not influence the whole bond |
| why, because they feeling knowing why will help | | | | market. However, when this situation is happening |
| them predict the future activity in both bond and | | | | often and to a number of companies it would |
| the stock markets. Beyond why, it is more | | | | cause the current decline in bonds. |
| important to know what is falling and what is | | | | There are also other reasons that bond prices |
| rising. By knowing both of those this things you | | | | decrease. The price per share of the stock and |
| can take action and avoid severe financial lost. | | | | mutual fund companies do fall. This is because a |
| Bond markets also do not have safety features | | | | great deal of their profits from from the trading |
| which help avoid large sell offs in the marker. This | | | | of bonds. Many insurances companies invest a |
| is because the action of the bond market is | | | | good bit of their capital in bonds which is also |
| extremely sharp and far more volatile than the | | | | affects as the prices for bonds decreases. |
| the stock market. There is nothing worse then | | | | Most businesses and lending companies depend on |
| being a bond holder in a decreasing market. Bond | | | | interest rates and can be affected by the dips in |
| statements can make your stomach turn when | | | | bond prices. The important questions here are |
| you realize, in text, that you are loosing money | | | | how will lending companies, and mortgage business |
| by the second. | | | | continue to be successful as interest rates |
| If your first sign of a decreasing bond market is | | | | continue to sore? How will high rates affect the |
| your statement you are probably working with a | | | | repayment of loans already made? |
| financial advisor that is inexperienced. When rates | | | | Most investors do not realize that bond markets |
| rise it is the utility companies, electric and gas, | | | | are not like the stock market. Bonds in most |
| that get effected first. This type of stock will | | | | countries are decentralized and there are |
| offer a similar pay out to bond yields. When these | | | | absolutely no common exchanges. These is |
| yields increase the pay off yields can no compete | | | | because bond issues are always different, and |
| with rising rates, and wave of selling begins. When | | | | offer a variety of securities for a longer period of |
| there is even a rumor of inflation bonds prices get | | | | time. It is usually the bank in America which make |
| smashed. Due to the recent new coverage of the | | | | the markets but remember they have no rules |
| price of gold and oil the perfect bond market | | | | which govern if and when they buy, sell, or stop |
| continues to grow. | | | | they participation in the bond market. |
| Individual bonds are influenced by two main | | | | |