FI635 University of Alabama How does the Fed's policy actions affect Bond Price? Discussion

User Generated

pmubh1995

Economics

FI635

The University of Alabama

Description

How does the Fed's policy actions affect Bond Price? What is your outlook for the bond market in 2019 and 2020?

As you have started the chapter on fixed income securities (bonds), here is a question for your discussion. I have included links to some articles and videos below. Don't panic, they are very short in most cases. In the first part of your post, discuss how the Fed's policy decisions can impact the bond market. Who would be most damaged by this Fed action, i.e. long term bond holders who hold till maturity or short term bondholders who plan to sell before maturity. Secondly, in your post, what is the outlook for interest rates and the bond market in the coming two years. Will the bond market flourish or flounder with the actions of the Fed. Please include an addition source for your conclusions, and reply to another poster.

I will expect higher level of analysis going forward on discussion boards, so some will need to put in a little more thought into their post.

Hope everyone had a wonderful 4th and enjoyed your day off! And yes, I am still processing the short answer portion. Slow and tedious.


https://www.finra.org/investors/bonds-and-interest-rates (Links to an external site.)

https://www.investopedia.com/articles/investing/101515/effect-fed-fund-rate-hikes-your-bond-portfolio.asp (Links to an external site.)

https://www.sec.gov/files/ib_interestraterisk.pdf (Links to an external site.)

https://www.nytimes.com/2019/06/19/business/dealbook/fed-rate-cut-bond-yields.html (Links to an external site.)

https://www.cnbc.com/2015/09/15/when-the-fed-raises-rates-heres-what-happens.html (Links to an external site.)

https://www.thebalance.com/when-will-the-fed-raise-rates-3306131

User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Explanation & Answer

Attached.

Running head: DISCUSSION

1

Discussion
Name
Institution

DISCUSSION

2

Discussion
Federal policy actions have a direct impact on the stability and prices of bonds in the
economy. Also, such policy actions determine the overall stability of the country’s bond market.
As such, it is critical for bondholders to understand the potential effects of government policy
actions on the prices of the bonds held over time (Piazzesi, 2005). In this case, the federal
government's effort to maintain low national fund rates since the 2008 financial crisis would
result in a gradual decline of the bond prices in the economy (Amadeo, 2019). However, a hike
in the federal fund rates would have different effects on the bond prices depending on the
duration of the portfolio he...


Anonymous
Goes above and beyond expectations!

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4

Similar Content

Related Tags