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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.