Factors Affecting Bond Yields

Three major drivers impact bond yields: short-term rates, the economy itself, and quantitative tightening. Lowering short-term rates, while keeping the economy strong, will result in higher long-term rates as investors are attracted to bonds. Conversely, if the economy is slowing, long-term rates will decrease because future growth potential requires less competition from the bond market. Additionally, quantitative tightening plays a role in influencing long-term rates. The interaction of these drivers can lead to a yield curve that affects market risk and stock performance.