By Marco BösingWhat Are Interest Rates and Bonds?
Interest rates and bonds are among the most fundamental concepts in financial markets. Bonds are debt instruments issued by governments or corporations to raise capital. The bond market is the largest financial market in the world and influences all other asset classes.
The relationship between bond prices and yields is inverse: when prices rise, yields fall — and vice versa. Yields reflect market expectations for future interest rates, inflation, and economic conditions.
For traders, bond yields serve as an important leading indicator. Changes in the bond market often signal shifts in sentiment before they become visible in equities or currencies.