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Money and Finances
Reply to "Treasury Bond Rates vs. Stock Market"
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[quote=Anonymous][quote=Anonymous]Correlation is not causation. The increase in interest rates doesn’t cause the market to crash. Maybe the market judges that equities are too risky, bonds become more attractive and demand drives up interest rates. Or maybe some event occurs that makes stocks less attractive and bonds more attractive. Mr Market is irrational over the short term and you just have to hope you last long enough to get the theoretical benefits of an efficient market. [/quote] Interest rates, bonds prices and stock prices are all reacting to the same economic news. If people are selling stocks and buying bonds the demand for bonds is increasing pushing up their price. As the price of bonds increases the interest rate on them actually decreases. If economic conditions are worse it is riskier for banks to make loans so they will need to charge higher interest rates.[/quote]
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