Question

why has the 10-year treasury bond rate fallen ? As of 12/31/19 it was 1.92, and...

why has the 10-year treasury bond rate fallen ? As of 12/31/19 it was 1.92, and today it is around 0.81. Explain?

Homework Answers

Answer #1

The treasury bond rate has fallen from 1.92 to 0.81 owing to the fact that the demand for T-bonds have increased.
An increase in the demand for treasury bonds lead to an increase in the price of the bonds. The increase in price, therefore, causes the bond rate to fall, which decreases the yield of the bond as well. The bond yield and the price of the bonds have an inverse relationship whereby the bonds are more attractive when the prices are low. Lower price will indicate a higher yield as the demand has fallen.

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