Bond Prices Rallied versus Interest Rates rallied

CFA Level III Fixed Income
#1

Hi,

I have seen in Fixed Income Reading 23 (Page 136) the following :

bonds with durations greater than 9—rallied (rates at the long end declined more than rates at the shorter end).

Question -

Bonds rallied means “Bond Prices went up”. Does interest rates rallied mean, “Interest rates went down or Interest rates went up”.

Thanks!

#2

Rates rally means rates go down (and therefore bond prices go up).

When rates go up, we say rates have sold off.

So rally means down, sell off means up. The way to remember it is what happens to bond prices in those moves.

#3

Thanks for confirming.

#4

Does the same apply to credit spreads? Does credit spreads rallied (other things equal) mean that credit spreads have narrowed (gone down) and therefore bond prices have increased?

#5

Yup.