“Recent Changes in Markets: Economic Factors’ Link in Treasury Yields”

A bond is a long-term contract under which a borrower agrees to make payments of

interest and principal on specific dates to the holders of the bond. Bonds are issued by
corporations and government agencies that are looking for long-term debt capital. Bond typically
has a varying yield dependent on the current interest of the economy.

An article in Wall Street Journal by Matt Wirz revealed that recently, U.S. government-
bond yields were dragged down to fresh all-time lows opposing their early rise last February
26[CITATION Mat20 \l 1033 ], 2020. One major economic factor thought of as the driver of the
sudden shift is the sign of coronavirus spread. Investors initially paused in buying Treasury
bonds mostly because yields dropped to record lows and bond prices increases. Traders and
analysts are keeping track with bond prices and demand movement as reports of new coronavirus
cases in places including South America have been reported.

With higher bond prices and decreasing yields, investors have shunned buying the bonds.
It depicts that valuation in bonds must really be considered to assess a good buy of bonds. As an
investment whose yields and prices vary with the changing rates in the market, an investor must
be well grounded with bond valuations to have a sound judgment as different factors affect the
movement in the market.

References

Davies, P. J. (2019, December 4). New Link Between Stocks, Bonds Shows How Markets Have
Changed. Retrieved March 2, 2020, from Dow Jones & Company Inc.:
www.wsj.com/amp/articles/new-link-between-stocks-bonds-shows-how-market-have-
changed
Wirz, M. (2020, February 26). Tresury Yields Hit Fresh Record Lows; Energy Bonds Slide.
Retrieved March 2, 2020, from Wall Street Journal: www.wsj.com/articles/treasury-
yields-rebound-from-record-lows-energy-bonds-slide

Christine G. Uriarte March 2, 2020

Synthesis on Chapter 7: Bonds and Their Valuation IA 2