There are many EXCUSES why the bond market may be selling off. But
the real reason we are seeing prices fall is because:
Debt Consolidation And Credit there are simply more sellers than buyers!
A borrowers normal annual income, including overtime that is regular or guaranteed.Salary is usually the principal source, but other income may qualify if it is significant and stable. Market participants look to U.S. Government economic releases as an indication of the economy's strength and general direction. Overall, economic indicators reflect the rate of economic growth and inflation which, in turn, affects interest rates. There is an inverse relationship between interest rates and bond prices. If the economic indicators indicate that the rate of inflation is on the rise, it will most likely result in higher interest rates and lower bond prices. Conversely, if these indicators indicate the rate of inflation is falling this will result in lower interest rates and higher bond prices. The following glossary defines what these indicators are and how they might affect the bond market.
Check Credit Rating That is an economic law that everyone on the planet seems to
know, but yet the "experts" on Wall Street always seem to scoff at
an answer that seems to be too straightforward and simple.
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Improve Credit Rating Remember, it does not matter why the price of something is
falling. It is better to know WHAT is rising and WHAT is falling,
rather than the reasons why something happens.
This is the percent of the civilian labor force currently unemployed. If unemployment figures are up, it indicates a lack of expansion within the economy and is, therefore, good for the bond market. Conversely, a big gain in employment would be an obvious cue for the Federal Reserve to tighten (raise) either the federal funds rate or the discount rate. Bond Market Moves Up In Price.
Credit Online Rating Report If we know WHAT is rising or falling, we can take action to
avoid the areas where prices are falling. And maybe improve our
chances of making money if we move into areas where prices are
going up, right?
The US bond market this morning is sending interesting signals to the world markets as the Fed's rate decision nears. Looking at September's bond futures contracts, we can see that their are expectation to cut interest rates by the Federal Reserve. However, currently the forex market is beginning to factor in a hike in December which might explain the recent strength of the US Dollar. Moreover, many investors expect the Fed to reiterate its concern about rising U.S. inflationary pressures and have bought dollars fairly aggressively in the past few weeks.
Credit Score Rating Scale We also noted that the bond market does not have the "safety
valves" in place to help stem any massive sell-off in the market
either. Don't forget:
The top row, right, describes a consumer with the highest underwriting rating ("A"), but whose status drops with her credit score (" MM"). Preferred rate. If her credit score is good or average, she gets the Preferred Rate, but if her credit score is below average, she gets the Standard rate. prime, Market rate, second from the lowest.
Bad Card Credit Credit People The moves in the bond market are significantly sharper and
more violent than moves we see in the stock market.
Free Credit Rating Report If you are a bondholder during a downturn, reading your monthly
statements could be hazardous to your health! It can be a painful
experience if you do not know what to expect, or are working with
someone inexperienced or if you really need the money before
maturity.
Credit Rating Scale Now, many in the market are aware that electric and gas utility
stocks often get clobbered when rates rise. These stocks often will
offer a dividend similar to current bond yields. So when yields
rise, the dividend yields of these stocks cannot move up fast
enough to keep up with rising rates, and so the selling wave
begins.
Bad Credit Rating Also, bonds often see their prices get crushed when there is
talk of inflation in the economic system. We've seen more headlines
about gold, oil and other commodities moving smartly higher
recently, so our "perfect bond market storm" continues to
develop.
Credit Rating Agency So what other areas can be affected when bond prices drop?
Certainly the share prices of the stock brokers and
mutual
fund investment companies can fall, as a great deal of
their profits come from trading bonds. Don't forget that many
insurance companies will keep an extremely large amount of money
invested in bonds for their own accounts. They could be affected if
bond prices fall.
Credit Rating Canada Any businesses that are dependent on interest rates in any way
will often be affected by bond slumps. How will companies in the
lending business, or in the mortgage business, hold up if rates
continue to move significantly higher? How will the loans made by
the banks perform if rates rise? What impact would that have on
bank stocks?
Bad Credit Mortgage Rating Something
else (and something important)
that you may not realize: the largest sector of the Standard
& Poor's 500 Index (S&P 500) is the
financial sector. If that area
of the market starts to falter, we could see an enormous
spillover into the stock market!
Good Credit Rating Thomas Mullooly, President of Mullooly Asset Management, works
one on one with individuals so they can regain control of their
investments. Tom's popular email alerts help folks to reduce the
risks in their portfolios. To learn how to stop making simple
investing mistakes and to sign up for Tom's email alerts, visit
http://www.advicefor401k.com, today!
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