Would a countries government bond yields over 10 years fluctuate with their real economies over 10...

Would a countries government bond yields over 10 years fluctuate with their real economies over 10 years? Would the government bond yield be associated to other macroeconomic indexes or events?

Expert Solution

Ans- country government bonds are those bonds which are issued by government of a country to fund government spending. These bond have maturity period of 3 months (91 days) to 40 years which pay periodic interest to bond holders over that period of time. Principle money is given at the time of maturity of bond.

Inflation- rising price of goods and services may result into higher interest rate of bonds and lower the value of investers bonds.

Deflation- deflation have positive result on bonds as they increase the value of the bond and lower it's interest rate. Deflation makes bond payment difficult as it becomes more expensive.

Government bond yeilds is directly associated with macroeconomics indicators such as real estate, GDP(gross domestic product), interest rate of banks and other financial institutions, fiscal policy etc. Price of real estate, equity and even price of commodities depends upon bond market. Bond market predicts the future economic activities like inflation, deflation in a country.

Rahul Sunny answered 6 months ago

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