What is the relationship between bond yield and the interest rate?

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When the interest rate is rising investors sell bond or buy it? I think investors sell bond and consequently the price is falling and the yield is rising, people sell the bond because they want keep their money in banks for getting more interest, that is right? but I saw an article in seeking alfa site it said when interest rate is growing people draws capital out of the stock market and into the bond markets in this situation why bond yield is growing?


At any point in time, there are *many* bonds traded: a vast majority are bonds that were issued in the past, but have not yet matured, and a relatively small number of bonds are bonds that are being newly issued. When interest rates increase, bond that were issued in the past when the rates were lower, but have not yet matured, become less attractive: demand for such bonds would be limited and holders of such bonds would prefer to dispose of them and purchase higher interest bearing assets (including bonds that are being newly issued). As a result, the prices of such bonds would decrease, but they still would be traded. For additional information, please see, for example: https://www.investopedia.com/ask/answers/05/ltbondrisk.asp#:~:text=Key%20Takeaways,have%20fewer%20coupon%20payments%20remaining.


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Associate Professor
Last updated on March 7, 2023