Fluctuating Treasury Bond Pricing and Values

It’s probable that bond pricing will soon be affected as the economy rebounds and interest rates start to rise. While the Fed has claimed to be committed to controlling interest rates, the stock market, on the other hand, has seen much fluctuation. Naturally, this is due to widespread concern over whether or not another financial catastrophe could be on the horizon, stemming from Greece’s debt crisis.

Thus, those investors who haven’t been solely focused on hunting down those higher yields had been looking to Treasury bonds more recently as a safe-haven investment.

What Is a Treasury Bond?

Investors collect on Treasury bond values, as they function not unlike an IOU between investors and the government, and these are generally attained through auctions. These bonds have a reputation for being virtually “riskless,” because the United States government essentially functions as your savings partner in the deal. So while the yield and bond values may be significantly lower than those associated with corporate bonds, with a treasury bond, you do not have to worry about issuing corporations defaulting. What also gives these “T bonds” a reputation for being less risky is the fact that they’re typically short-term investments, so T bond values are also far less sensitive to market fluctuations.

Treasury Bond Values Begin to fall out of Favor

So while it’s understandable how many would flock to safety bids in uncertain times, it may seem that the recent uptrend for safe-haven investments may soon run its course.

While Treasury bond pricing and benchmark yields had risen on Wednesday, May 5, as the 10-year yield had reached the lowest levels seen in five months, driving up bond pricing in the process, this upturn would prove to be short lived. Treasury note bond pricing dropped 34.375 cents to $101.5625 just days later on Friday, as the stock market was able to regain its footing.

Naturally, more investors will begin to regain their cravings for high risk and yields -- such is the ebb and flow of bond pricing. Investors will always dance between safe-haven investments and fatty yield bond values. However, you can be sure that whenever there is uncertainty, safety bids will rise until the storm rides out. Perhaps it is those investors who think more outside the box that make the biggest returns on bond values.