According to the law of supply and demand, bond prices behave similarly to those of other derivatives. That is, as demand increases, bond prices increase and correspondingly, when demand decreases, bond prices decrease, provided that the other factors remain stable. In the event of a change in supply, the increase reduces the price of the bond, while the decrease in supply will increase the price of the bond.
Price and yield of bonds are characterized by a negative relationship, with each change of one moving the other in reverse. So an investment financing by increasing the bond offer to finance a company, this increase in the bond offer has the effect of reducing their price and increasing the yield of the bonds. A similar behavior can be seen in the case of government securities with the tactic of reducing the bond market, with the ultimate goal of raising interest rates in the economy, known as quantitative easing (QE) with bond prices falling and interest rates (yield) ) to increase.
In both cases the behavior of the basic economic equilibrium is observed with the decrease of the price to increase the yield of the bond with the corresponding increase of the price to decrease of the yield itself.
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