Fixed income

CFA Level II
#1

“When looking at fixed income investment, with a growth in potential GDP we would expect interest rates to rise”

This statement does not make sense to me. Wouldn’t we expect the interest rate to rise when potential GDP is expected to fall? As there would be more credit/sovereign risk in the markets.

#2

Where did you read this statement please?

#3

Ahh you are not comparing actual gdp with potential here, so if potential gdp will grow up then interest rate will rise too

#4

GDP, inflation and interest rates are all positively correlated from my understanding…