Just want to get some feedback from you guys here as to what you think the impact on Bond prices and yields would be for both short-term and long-term bonds in each of the following 2 cases: 1. Economic Slowdown - What’s the general impact on Bonds? 2. Inflation Concerns - if investors expect inflation to rise in the near-term, what would the impact on bonds be. My thinking is that economic slowdowns generally result in people shifting their investment dollars towards bonds. Increased demand for bonds will raise bond prices and reduce yields. However, when thinking about inflation, what would the impact be the same or would people still prefer to hold equity type investments to offset the depreciation of their investments due to rising inflation? I’m trying to get a better handle on the yield curve, and what the impact of various economic conditions will have on bond prices in general, both short-term and long-term.
Fed actions impact the short-term rates more than they impact the long-term rate. However, if the bond holders feel that a rate cut will spark inflation, then long-term rates should rise.