CME

CFA Level III
#1

Hi ,

Can smeone please expalin what happens to the fixed income market when there is a stimulative action like increase in money supply by the central bank or increase in government spending.

#2

Short term interest rate declines. New bond issued will have lower coupon rates. Already issued bonds which have higher coupon rates, will rise in value.

#3

Someone needs to verify what I said though. (A lot of time I am wrong in these forums)

#4

Thanks Sachin .

I thought so . When there is a stimulative action by the government means rates are reduced and the bond prices rise. Please see Q 16 Rgd 16 CFAI