Question by TheBluesman: Why and when do Government bonds fall?
Hi, I have a question and I’m not sure why a Govt. bond would fall, or what that means?
e.g. Greek bonds fell for a third day, with the yield on the two-year note rising 1.3 percentage point to 6.41 percent.
Best answer:
Answer by Len
Bonds fall when interest rates rise. These bonds have repayment obligations. When they fall or fail, the sponsoring nation is at risk of losing the opportunity to borrow due to diminished credit facilities. This cripples economies, stifles business and wrecks governmental administrations.
Failing economies drop as people lose confidence in their ability to continue as in better times. Rising rates are often perceived as a last ditch and desperate attempt to create the image of strength. At the same time, those rising rates work against bond securitization.
Len
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