Another potential catalyst for falling yields is the prospect of sharp fiscal tightening at the turn of the year.
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Kindleberger observes in "Reaching for yield"(p. 82), financial history offers many examples of times when falling yields on British consuls and other relatively safe investments generated speculative excess, followed by crash.
Yet Brian Coulton of Fitch, a rating agency, points out that this reflects falling German yields (as investors seek ultra-safe havens) rather than rising Italian ones.
"Over the past year, the impact of rising equity markets has outweighed the effect of falling bond yields and led to an overall improvement in the funding position, " the PPF said.
Normally falling bond yields lead to rising equity prices as investors place a higher value on future earnings, but this effect has been conspicuous by its absence in the current bear market.
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There are more risks of bond yields rising, than of bond yields falling over that period.
Other analysts said the stock market was also being lifted by investors moving funds out of bonds and into stocks, as a result of bond yields falling.
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How about German government bond yields falling to six-week lows on Wednesday as investors showed their willingness to pay Berlin to look after their money for two years for the first time ever.
And if the prices of your old debt are falling then the yields on that debt are rising (bond prices and yields move inversely) and thus you have to pay more for new borrowings: for the new debt is priced compared to the old.
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Inverse floaters are a tool for earning higher yields in an environment with flat to falling rates (through the wizardry of mortgage securitization, they transform falling market rates into higher yields).
Mr. Castelli recently issued the following recommendation to his clients: Bet on rising Treasury yields and falling prices.
Both Tepper and Stepherson spoke about the increased correlation between gold, oil, copper, equities, and falling dollar and bond yields.
That is, when yields rise the price or value of bonds declines, and in the other direction, when yields are falling, bond prices rise.
One look at the risk market shows that Treasury yields are falling as demand for the safety of US government bonds has returned to the market.
Earlier in the 1990s Japan was able to use fiscal packages to reflate its economy because bond markets were pretty strong and bond yields kept falling.
Treasury yields are falling as investors seek safer harbours.
Bond prices are slowly falling as a result lifting yields back above 3.5% as they go.
In an environment when yields have been falling, that relatively long duration has paid off as bond prices jumped.
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The government said shortly after the earthquake that it expected two outcomes: A falling yen and rising bond yields.
If people have started to increase short positions in bonds this at the very least represents growing concern that prices may not rise forever, nor yields keep on falling.
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But yields are also falling because investors are panicking.
After falling steadily for 30 years, bond yields are now heading north with a full head of steam.
Spanish and Italian bond yields have been stable to falling, which hints the EU debt crisis is at least not worsening at present.
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In times of falling equity or commodity markets, rising bond yields, inflation or increasing risk aversion, gold shines.
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As for the dollar, the reason to worry would be if a falling currency prompted foreign investors to demand higher yields on American Treasury bonds to compensate them for the risk.
Indeed, bond yields have been rising (bond prices falling) since the Fed first began talking in early September of providing the monetary stimulus.
And Japanese prices have been flat or falling for most of the period, so real bond yields have still been positive.
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By February 2005, a confused Greenspan admitted the fact that yields on 10-year Treasury securities kept falling even as he and fellow Federal Reserve policy makers kept raising short-term rates.
CIB, said the "biggest risk for credit markets going forward is a faster-than-expected U.S. economic recovery, which would likely see an increase in U.S. Treasury yields and a rotation into equities, " resulting in falling bond prices.
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