Bond yields are directly related to interest rates since it is the rate at which an investor is likely to obtain profits. Increase of interest rates leads to issue of new bonds at higher coupon rates rendering the old ones with less coupon rates to be less desirable. This leads to a decline in the price of the current bonds that raises the yield to the new and higher rates. On the other hand, bond prices increase and interest rates decrease when the interest rates decline, and the yield reduces as the investors are ready to get less on the security of the fixed-income payments. Bond yields are the indicator of the market conditions that are meticulously observed by the investors.


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