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usually invest in? How does
that affect the USD for example

when interest rates are
increased? And where can you

guys, I hope you enjoy this
lesson. Um definitely take some

looking at once you understand
this you know the relationship

the price of the US dollar for
example everything that so it's

I'd advise you out of all the
lessons research more about

an overpriced bond but it only
increases this much. In a whole

year. Just a tiny bit, tiny
bit. Whereas before, you would

Furthermore to that interest
rates are reduced therefore

the lower interest rates? What
happens with the rate hikes or

how does that affect all of the
other currency pairs that I'm

one of the key lessons we've
learnt up until now. So yeah

Now when the time is right and
you can expect bond yields to

expect go global investment to
go? And that right there global

can effectively predict the
economy ahead of time 100% and

incur losses. So if you're if
it's in a time of recession and

your yield on that is not very
high at all. So you might have

especially in the bond market
because as we know the bond

Fed that would be the Perfect
price to invest into bonds. Now

we're in a recession, what do,
you know, what do investors

during the confirmation where
the Fed you know released some

notes as much as possible. But
yeah, anyways, I'll see you in

take some time to understand
this whole lesson. Now question

this really ties into the
market cycle into where we see

one year. And the second type
is long term bonds that yield

settled slightly then that
would be a good time. So it's

all you're paying a very
premium price for a bond that

you're investing in into
overpriced bonds even then

substantial amount. That's
exactly what we see where the

demand is in that as well and
of course this has a lot to do

interest rates. Um this is
something that's discussed in

can expect in a thriving
economy. As a result you can

FOMC meetings and you know
other announcements from the

a recession stocks tend to drop
hard as many companies cannot

you're still not achieving the
interest rate return that you

market is so related to the
government their monetary

normal economic growth the two
main asset classes that people

gains. You know you might see
you might see pro 20% gains in

would have been the best time
for to buy that bond.

Something that you truly need
to consider because first of

may that you could find the
discounted price afterwards or

because of the demand of them
and you say okay I'm going to

invest in is in both stocks
which can bring substantial

have seen increases this much.
So what's good to invest in?

even perhaps not afterwards but
before before this all happened

yourself. What's the impact of
a recession? What happens with

that's going to have on the
market. If you understand that

between bond bond yields yield
curves and interest rates we

kind of announcements that
they're going to be increasing

aren't going to be as promising
as they were when the economy

rise in tandem with interest
rate hikes and bond prices have

you're investing into bonds but
bond prices have gone up

be investing into a bond right
now at the peak it's it's

investment is the main thing.
You've got to understand where

teaching you it's actually
understanding why does the

economic cycle happen so why do
you see this and what causes

performing in terms of bonds
the Fed will lower interest

yield is higher during normal
economic growth. However during

all of this to happen and what
are the effects of it

short term yields increase and
that's where you start to get

right here and you start to see
recession happen you can't be

here actually keep it in you
know wherever because this is

where investors are putting
their money and what effect

this as well get your head
wrapped around it fully because

the economy therefore yields on
the bonds drop as the interest

function as normal. Therefore
they lose their investors sell

price whilst the yields are
very low. What this means is if

stock supply increases price
drops so think about supply and

rates and bond yields correlate
bond prices then increase in

large enough. Now during a
recession interest rates fall

and so stocks become less
attractive as they become

is moving as it should or you
know growing. Um so this

happen there will be rate hikes
arise in interest rates to cool

reduces long term yields and
increase in short term yields.

bearish. So you can understand
during a recession stocks

expect an overheated economy
and what's the result of that

it's because when we're when
we're at the top of the cycle

curve either flattens or
inverts if the effect is way

the inversion happen. Of course
the flat yield curve occurs

down the economy and deflate so
there's two choices the yield

too strong now during the cool
to not cause a recession. The

people that are buying there's
an increased demand for the

So what's good to invest in in
during a recession? Now with

reverts back to lowering it
interests, interest rates and

less available and of course
their prices increase. So as

increases the demand for bonds
raising their prices due to the

prices increase yields drop.
And that's exactly what you

bonds. More people are paying
for them. Therefore there's

will increase to a crazy amount
as well. So that's why the Fed

policies and everything that
they do

So if you are wondering why we
actually do invert at the time

get. Now really and truly take
take note of this page right

one of the most important
lessons that I'm going to be

theory of supply and demand.
This is quite simple. The more

first and then the inverted
yield curve if the effect is

yield curve and the economic
cycle. So during economic

rates to combat this now when
this overheated economy does

term bond holders expect to
overheated economy at some

point. So interest rates will
increase to combat this. So

explained. Now have a look
here. In early 2007 you can see

know what happens when they're
economy is grown at you know at

federal will revert back to
lower interest rates which

the Fed will eventually will
eventually increase interest

So just briefly wrapping this
up as well. Explaining the

increasing interest rates any
further right? Because you're

a pace where inflation
increases and everything they

that's when you start to see
long term yields reduce and

and it's sloping upwards. So
the longer term bond holders

with the actual health of the
stock and how well it's

you've got to refer back to
inflationary conditions. You

January 2007 and then we didn't
get the crisis till much later

than the longer term maturities
and this just signifies you

see an inverted yield curve
that's when you know an

one thing to understand as well
with this quite obvious but the

want their premium through a
high higher yield. The long

rates during a recession to
promote some kind of growth in

assets for example increasing
gold assets and everything like

that we we'd usually expect
this was happening at the time.

actually pointed this out and
many banks or many of the smart

lower term maturity bonds they
have a higher yield at the time

expect the opposite.

themselves for this saying that
they were diversifying their

this. So guys whenever you're
looking more into yield curves

So the inverted yield curve. We
can use the yield curve to

know we're not in an economic
expansion because usually you'd

And exactly one later in mid
2008 the business cycle

So this is in January back then
and we started to get downward

not be an immediate reaction of
course this this one was from

on in 2008 it's a much longer
term indicator just obviously

that. But rather it's the fact
that they actually knew the

declined. Therefore what
especially if you economists

growth there's low interest
rates. Yield curve is normal

banks at the time JP Morgan
they actually prepared

that we started to get a
downward slope in yield curve.

economic recession is bound to
happen now it might it might

just going to be triggering
that even more unemployment

predict the future of the
economic cycle as we just

and everything actually look to
see what's happening and if you

the flat yield curve continues
and the market is responding in

recession was going to come and
one of the main indicators is

something interesting to read
about as well. Because it

yield curve. Rather than seeing
you know the upward yield curve

actually expect the flat yield
curve potentially would be a

flat yield curve so this is
where the normal yield curve

move in waves like this right?
The times that you would

could come to a time where
there is a slow down in the

that's when you get the
inverted yield curves which

to the impact. So just a
reference to that again the

certain images and search up
online as well but there's

you're going to look at next.
Now for example it come it

doesn't happen too too often.
Now what this implies is an

economy and potentially you can
see an inverted yield curve due

every bond market where you
might be approaching a crucial

variation of this as well and
if I was you I'd even search up

could be around the two year,
the five year, the ten year

would occur because the economy
is growing. Eventually you're

it on right now. If you think
back to our economic cycle. We

going to get to a flat yield
curve before the invert then if

that way then you're going to
get inverted which signifies

that you're going to be going
into recession.

around then you might get
slightly boosted one that's

this area where you start to
see some flattening out. Now

uncertain economic time. So
when you get flat yields in

certain humps when it comes to
the central maturity so that

curve. So what you would see is
similar yields across all

this bit here or you could even
say at the peaks or the bottoms

point of the economic cycle. So
if you I'm just going to draw

maturities for bonds. Um
there's there's a slight

this is not always the case as
in the case of the flat yield

some way therefore the yield is
expected to be higher however

sense right? The reason is is
because they want to be

compensated for the risk of the
long term hold and how change

exposed in the market therefore
they want to be compensated in

investors who are involved with
the 30 year bond they're more

They actually expect a larger
yield. And that would make

understand over time interest
rates changed obviously

in interest rates can really
affect it so as you as you can

monetary policies and
everything else so the

and then of course the 30 year
would show the maximum one. Now

here the the three month would
be would show the lowest yield

investors who invest into the
longer term maturity yields.

curve that we're going to be
look at is the normal one. So

for a long term perspective on
the market. So the first yield

this obviously points to
economic expansion and

the normal yield curve slopes
upwards showing that short term

interest rates are lower than
long term rates. As you can see

trade Forex and obviously just
currencies we won't use this

actually trade bonds you know
the bond contracts they will

you know the daily yield curves
as much but rather we'd use it

use this bond yield curve to
their advantage. Now because we

be an economic crisis very soon
and the yield curve rates are

published on the treasury's
website every single trade in

one of the indicators to
identify when there's going to

inverted yield curve points
towards an economic recession

day of course you can
understand that people who

that may happen in the future
and this is actually used as

of normal normal curves they
always point to economic

expansion so that means where
the economy is growing as

term bonds have higher yields
than short term ones. In terms

normal however a downward
sloping curve also known as the

curve also known as the normal
yield curve is where longer

include normal, inverted and
flat. The upward slope in yield

actual bond yield curves that
we usually look at is a two

can range from three months all
the way to 30 years. Um the the

because economists actually use
this to determine what part of

day trading particularly with
bonds. Now a yield curve is a

year and a 10 year. Now the
three key types of yield curves

chart representation of the
different interest rates paid

the market cycle they're in but
also when it comes to day to

by bonds of different
maturities. So these maturities

understanding you know just
bond prices and everything

the yield curves. Now this is
probably just as important as

Yes everyone welcome to the
next video. So in this one

relationship that we looked at
and we're going more depth into

we're obviously moving on from
the bonds and the yield

the next lesson. Take care.