The inverse relationship between prices and yields

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Bond yields move in the opposite direction of bond prices. When demand for bonds increases, prices rise and yields fall. When demand weakens, prices fall and yields rise.

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This relationship matters because yields determine the return investors receive for holding bonds. Changes in inflation expectations, interest rate outlooks or risk perceptions can quickly alter demand for bonds, leading to sharp yield movements.

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Because bonds are traded continuously in large volumes, yield changes often reflect real-time shifts in market expectations, making them a key signal for broader market dynamics.