Bond Prices and Yields as Equivalent Measures of Value
Summary
The document explains the inverse relationship between a bond’s price and its yield, while cautioning against treating one as the sole driver of the other. Price and yield are two ways of expressing the same information about a particular bond: when its price changes, its yield changes inversely. The response therefore reframes the question of whether investors first demanded higher yields or sold bonds, describing the two observations as linked rather than as separate causes.
The example concerns Treasury futures during changing equity-market conditions. The response says Treasury prices rose as equities fell, then declined as equities recovered. It offers a brief market observation, not a general explanation of investor flows or a detailed account of futures pricing. The account is limited to the stated period and does not establish that Treasuries always move opposite to equities.
Key ideas
- A particular bond’s price and yield move inversely.
- Price and yield express the same bond information, so it is not meaningful to assign one as the sole driver of the other.
- The cited market episode had Treasury prices rising as equities fell and later falling as equities recovered.
- The example does not establish a universal relationship between Treasury and equity prices.
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Full text
# Bond Prices verse Yields # Bond Prices verse Yields So maybe this isn't the right place for this question as it could be construed as an open-ended market speculation question the way I frame it, but I am trying to solidify my knowledge in regards to the open bond / treasury markets I know the price of a bond / treasury and its' yield is inversely related. So I was surprised to see when I pulled up the 2, /ZT and 10-year, /ZN futures quote that their quoted prices had decreased. I would have expected the price of treasuries to go up due to more buyers in times of panic as was the case earlier this week in the equities market. I guess it's possible people wanted to liquidate everything earlier this week? Even treasury holdings? My concrete question relates to the yield and price dynamic... Am I thinking about it correctly that price affects yield not the other way around? What I'm saying is that an explanation for earlier this week IS NOT that investors demanded higher yields and thus treasury prices fell correct? Rather Investors were selling their treasury holdings forcing prices lower and yields to rise? Thanks for the replies, and I hope this forum is the place for this type of question ## Answer by dm63 (score 2) https://quant.stackexchange.com/a/80259 Price and yield of a particular bond are inversely related and it is not meaningful to say which drives the other. They are two ways of giving the exact same information. Earlier this week prices rose as equity markets fell, the later this week bond prices fell as equity markets recovered.
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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.