Fed just raised rates another quarter...if you care...

Um...yes...

Yields on bonds are down big. This means the PRICES of the bonds have risen. Thanks for playing.

 

You should read this before giving out anymore financial advice
http://stocks.about.com/od/understandingstocks/a/Bondint111004.htm

Understanding Bond Prices and Interest Rates
From Ken Little,Your Guide to Stocks.

Bonds provide an element of stability that offsets some of the volatility of stocks. However, they are vulnerable to economic changes that can undermine their value.
The biggest economic threat to bonds is rising interest rates. If you own a bond and interest rates go up, the value of your bond on the open market, with few exceptions, will go down.

Of course, if you plan to hold the bond to maturity the value of your bond doesn’t change because interest rates change. You’ll still get the amount promise when you bought the bond, all other things being equal.

However, if you plan to own bonds for investment purposes - that is you buy and sell bonds as you would stocks - then interest rates are very important.

Bond Prices
Bond prices move inversely to interest rates. When interest rates go up, bond prices go down and when interest rates go down, bond prices go up. Remember, we’re talking about previously issued bonds trading on the open market. The inverse relationship is easy to see with this simple illustration.

A bond is issued for $10,000 for five years with a 5% coupon or interest rate, paid every six months. Then interest rates rise to 6%.

If you want to sell this bond, who would buy it when it is paying 1% below market rates (5% vs. 6%)? You have to sweeten the deal so the buyer gets a market rate for the bond.

You can’t change the interest rate on the bond. That’s fixed at 5%. You can, however change the price you will take for the bond.

The annual payment of $500 ($10,000 x 5%) must equal a 6% payment. Doing the math, you discover that the face value of the bond must be discounted to $8,333 so that the $500 fixed payment equals a 6% yield on the buyer’s investment ($8,333 x 6% = $500).

If interest rates went down instead of up, you could then sell your bond at a premium over face value because the fixed interest rate would be higher than the market rate.

Illustration
PLEASE NOTE: This is just an example to illustrate the relationship between interest rates and bond prices. It does not represent an actual computation. To do this calculation correctly would require a more complicated process and the answer would be different. However, the seller would still have to discount the face value of the bond to compensate for the interest rate difference.
As I noted above, none of this matters if you plan to hold the bond to maturity. Changing interest rates have no effect on existing bonds unless you plan to buy or sell them in the open market.

Conclusion
Because of the interest rate risk, bonds with longer terms are more risky than bonds with shorter terms. If you plan to trade bonds, be sure you understand the interest rate risks involved and how holding long-term bonds increases that risk.

 

We are discussing 2 things. PRIME rate is a pre set rate. 8.25%

The market moves the price of the bonds...Even with prime going up...bond PRICES have increased today. Yields on bonds are DOWN today. Mortgage rates are better.

I am right. Sorry.

 

Don't need to read it....

Symbol Last Change
Dow 11,181.68 208.12 (1.90%)
Nasdaq 2,169.71 57.87 (2.74%)
S&P 500 1,271.16 25.16 (2.02%)
10-Yr Bond 5.2% -0.45
NYSE Volume 2,293,964,000
Nasdaq Volume 1,893,076,000

Please notice that TODAY...the yield on the 10 Year Treasury is DOWN. That is because people are BUYING bonds. Why? Because there is no fear of an increase of .5. The uncertainty has been taken out of the market. The uncertainty is one of the reasons bond prices have been falling so fast over the past 2 weeks.

Now that prime has gone UP .25%....money is going back into bonds.

Tell ya what...anyone that has a bond mutual fund...look at the change in the morning...Your fund will be higher in price.

 

Read your OWN quote Mr. Chipshit...

Bond Prices
Bond prices move inversely to interest rates. When interest rates go up, bond prices go down and when interest rates go down, bond prices go up. Remember, we’re talking about previously issued bonds trading on the open market.

And TODAY rates have FALLEN because bonds are going UP because the uncertainty has left the market.

 

Ya'll done got FREAKSHOWNED.

VWELX is the shizzle.

 

i hope we can sell our house and purchase the next one before our locked in loan rate deadline passes :banginghe

 

So which is it?

Rate up, Bond prices up, yields down
or
Rate up, Bond prices down, yeild up

You've said both

 

Okay...forget the Prime rate...

Bottom line....people are buying bonds...so yields have dropped...

This was CAUSED by Prime going up today...people were worried prime might go up .5...so they were either selling or sitting on the sidelines.

When it was confirmed it was only .25 they jumped in and bought bonds. Causing the yields to go down.

 

With the prime rate increasing and lots of those ARMs beginning to readjust, I imagine lots of folks are shitting bricks right about now.