TransWikia.com

Do inflows influence bond prices and/or yields

Personal Finance & Money Asked on June 30, 2021

In the absence of selling, additional purchases of an equity drive the price up.

What if any sort of effect does purchasing do to the price and/or yield of a bond (irrespective of interest rate effects)?

One Answer

As in any market, purchases will bias the price process to be higher than without buying. Much of market microstructure research shows that for theoretical reasons and confirms it with empirical work.

Fixed income ranges from much more liquid than most equities (US Treasuries) to far less liquid than equities (municipal bonds, very small corporate bonds, emerging market debt). A thorough overview is Bessembinder, Spatt, and Venkataraman (2020); you might also find this 2016 BIS CGFS paper informative. Finally, Ottonello (2019) shows that inflows to bond funds tend to push prices higher (and thus yields lower).

Correct answer by kurtosis on June 30, 2021

Add your own answers!

Ask a Question

Get help from others!

© 2024 TransWikia.com. All rights reserved. Sites we Love: PCI Database, UKBizDB, Menu Kuliner, Sharing RPP