The bond market

For ever odd

How do the bond market's work?

ixus

Fixed Income Trading: investopedia has a decent section to begin.

http://www.investopedia.com/university/how-to-trade-fixed-income-securities/

For ever odd

ixus wrote: »

Fixed Income Trading: investopedia has a decent section to begin.

http://www.investopedia.com/university/how-to-trade-fixed-income-securities/

Thanks ixus, on a follow up I came across the page below

http://www.investopedia.com/university/advancedbond/.

I am interested in the bond markets relationship with equities, fx and commodities. just looking to upgrade my basic understanding.

Edit

http://www.investopedia.com/articles/fundamental-analysis/09/intermarket-relations.asp

The Market Push and Pull

Let's take a look at how commodities, bonds, stocks and currencies interact. As commodity prices rise, the cost of goods is pushed up. This increasing price action is inflationary, and interest rates also rise to reflect the inflation. Since the relationship between interest rates and bond prices is inverse, bond prices fall as interest rates rise.

Bond prices and stocks are generally correlated. When bond prices begin to fall, stocks will eventually follow suit and head down as well. As borrowing becomes more expensive and the cost of doing business rises due to inflation, it is reasonable to assume that companies (stocks) will not do as well. Once again, we will see a lag between bond prices falling and the resulting stock market decline.

The currency markets have an impact on all markets, but the main one to focus on is commodity prices. Commodity prices affect bonds and, subsequently, stocks. The U.S. dollar and commodity prices generally trend in opposite directions. As the dollar declines relative to other currencies, the reaction can be seen in commodity prices (which are based in U.S. dollars). (For more insight, see Commodity Prices And Currency Movements.)

The table below shows the basic relationships of the markets. The table moves from left to right and the starting point can be anywhere in the row. The result of that move will be reflected in the market action to the right.

Currency: Ý Commodities: ß Bond Prices: Ý
Stocks: Ý
Currency: ß Commodities: Ý Bond Prices: ß Stocks: ß
Remember that there are response lags between each of the markets' reactions - not everything happens at once. During that lag, many other factors could come into play.

So, if there are so many lags, and sometimes inverse markets are moving in the same direction when they should be moving in opposite directions, how can the investor take advantage?