57. What Traders Know About Interest Rates Part 2

[pelleqq]

Tak få din forklaring det har været til en store hjælp, med at få en bedre forståelse:)

[kyu012]

I have 2 questions for you.

1. You claim that a rise in interest rates result in a slide in the stock market AND a slide in existing bond prices. Don't bond and stock prices move in opposite directions?

2. If a rise in interest rates results in a rise in the currency, does that capital inflow generally chase after debt instruments only and not equities?

[JaiisGod]

for your #1-rise in int rates makes the new bonds issued by the US govt more attractive. Thus demand shifts from equities to the safe heaven fixed income higher yeilding bonds. Also as existiing bonds which are yeilding lower than newly issued, obviously investor will go for the later one, lowering the price of current one.

hope this clears your doubt.

[JaiisGod]

for #2, rising interest rates doesnt mean there is no demand for equities. But most economies in the world, which always look for safe heavens of their savings, will choose bonds over equities. Because it is not only giving you a fixed return but also assuring you the safegaurd of your notional amount, which is not predictable in equities. Again I say economies, but you are thinking from the individual point of view.

cheers

[kyu012]

Very informative and well organized!

[ydrohoos]

great work

thanks a lot

[subprime2006]

12/16/2008

30 yr fixed = 4.375% (pay 1 point (percent) COST).

[KevinMcNash]

your videos have been very helpful, thanks.

[InformedTrades]

Hi Kevin, Thanks for the comment and for watching I am glad you like them. Best Regards, Dave

[popeeka]

very interesting! keep on posting!

[InformedTrades]

hi popeeka, Thanks for the comment am glad you liked it and don't worry there are lots more to come! Best Regards, Dave