Bonds are debt instruments issued by governments, companies, or institutions to raise capital.

When an investor buys a bond, they:

• Lend money to the issuer

• Receive regular interest payments

• Get the principal repaid at maturity

Bonds are widely used by governments and banks and play a central role in financial markets.

A yield represents the return an investor earns from a bond.

It reflects:

• Interest payments

• The bond’s price

• Time to maturity

When bond prices fall, yields rise.
When bond prices rise, yields fall.

Yields are closely watched because they influence borrowing costs and investment decisions.

The yield curve shows the relationship between bond yields and their maturities.

• An upward-sloping curve suggests normal economic growth

• A flat or inverted curve may signal economic slowdown or recession

The yield curve is an important indicator for economists, central banks, and investors.

Bond yields affect:

• Equity valuations

• Currency movements

• Bank profitability

• Government financing costs

Rising yields can tighten financial conditions, while falling yields often support risk-taking.

Because bonds are the foundation of the financial system, yield movements influence all major asset classes.

Bank stocks represent ownership in publicly listed banks.

Their performance depends on:

• Interest rates

• Credit quality

• Economic growth

• Regulatory conditions

Bank stocks are often viewed as a reflection of financial system health.

Interest rates influence stock markets through:

• Corporate borrowing costs

• Consumer spending

• Discount rates used in valuations

Rising rates may pressure stock prices, while falling rates often support equity markets.

The impact varies by sector, with banks and financials reacting differently than growth-focused companies.