[pinko]

I wouldn't be surprised if the Chinese government raised the interest rates in the near future more than the US will raise its interest rates.

What will happen to bonds in Chinese currency? Of course the Chinese currency will appreciate, but will the price of the bonds raise or drop?

Thanks.

[BryanL]

Originally Posted by pinko

I wouldn't be surprised if the Chinese government raised the interest rates in the near future more than the US will raise its interest rates.

What will happen to bonds in Chinese currency? Of course the Chinese currency will appreciate, but will the price of the bonds raise or drop?

Thanks.

A rise in the interest rates will make it so the demand for bonds to increase and then the price of bonds will decrease. Stocks will also decrease due to people moving their investments into low risk bonds and the decrease in consumption will make it so business profits shrink and people will move their money out of their stocks.

So to answer your question, the price of bonds will drop.

[pinko]

Originally Posted by BryanL

A rise in the interest rates will make it so the demand for bonds to increase and then the price of bonds will decrease

Thanks, that's what I thought. But I think you meant that the 'demand for bonds will decrease', right?

By the way, I read that the interest rates given by banks in China for Yuan in saving accounts is higher than the interest rates given for Yuan in HK? Is that so?

[freeier]

let's put it in the proper context.

CNY is a capital controlled currency. there is an onshore and an offshore market.
i am not even sure if they actually have cny treasury and bonds actively traded.. so your question could be kind of moot in this context.

[BryanL]

Originally Posted by pinko

Thanks, that's what I thought. But I think you meant that the 'demand for bonds will decrease', right?

No, demand would increase because the higher interest rate will make bond's a more attractive investment. If the interest rate is let's say 5%, and your stock investment can maybe yield 6-8%, why take a risk when you can have a guaranteed 5% bond.

The high demand drives the price down.

[JT06]

Sorry for the ignorance. How does the high demand drive the price down??

[freeier]

high demand drive prices up but the yield down

[MS@HK]

Originally Posted by BryanL

The high demand drives the price down.

BS.


Rate rise=> your old bonds which have a lower rate on them are worth less bcos the market gives u a better rate.

[freeier]

huh? i am just commenting on the statement why does high demand drive price down.

[edwardo232]

ya.. how can high demand drives price down??

high depend leads to high price... supply/demand right?


if not, then i blame my high school teacher