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Bond prices

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  • Mon, Jun 08, 2009 - 05:08pm



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    Bond prices

There has been much talk recently about Bond prices and their link to inflation. Is it possible to argue that that that link has been broken?. My thinking is as follows: The level of Bonds issued is so high and Governments have no option but to sell them that in effect they are a forced sale. In any forced sale the buyer dictates the price and they will do so on terms very favourable to them and the seller has no option but to accept them. This means the buyer is less concerned with inflation and can impose onerous terms on the seller even if they think that inflation will fall. Is this thinking reasonable? I would be interested in what the panel thinks.  Apologies if its been asked before.

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