Economics Bonds Questions Medium
The relationship between bond prices and supply and demand is inverse. When there is high demand for bonds, the price of bonds increases. Conversely, when there is low demand for bonds, the price of bonds decreases. This relationship is primarily driven by changes in interest rates. When interest rates decrease, the demand for bonds increases as investors seek higher yields, leading to an increase in bond prices. On the other hand, when interest rates rise, the demand for bonds decreases as investors can find better returns elsewhere, causing bond prices to decline. Additionally, changes in market conditions, economic outlook, and investor sentiment can also impact the supply and demand dynamics, influencing bond prices.