Keep out of bubble trouble
The global bond market is worth around $US120 trillion ($158 trillion) and growing daily. For those who aren’t familiar with bonds, think of them as agreements between borrowers and lenders. Your home loan is basically a bond between you and the bank. It gives you the money, you promise to pay it back. To fund this, the bank borrows money from someone else so it can lend to you. Companies borrow from different types of investors, as do governments. You get the drift.
Bond agreements are often traded publicly on the market. For example, the US government’s borrowings are traded and investors can buy or sell them on the open market. Each bond will dictate the interest rate payable by the borrower to the lender. For example, your home loan might be fixed at 2% for the next couple of years and then be variable until it’s paid off.
It’s important to get a basic concept right in your mind: when bond prices rise, interest
