fixed income

When GDP growth starts decreasing, it often leads to changes in interest rates, which in turn can impact bond prices. Here’s a general overview:

1. Inverse Relationship: Bond prices and interest rates have an inverse relationship. When interest rates rise, bond prices tend to fall, and when interest rates fall, bond prices tend to rise.
2. GDP Growth and Interest Rates: During periods of decreasing GDP growth, central banks may respond by implementing monetary policy measures to stimulate the economy. One common tool is to lower interest rates. When interest rates decrease, existing bonds paying higher interest become more attractive, leading to an increase in their prices.
3. Recession and Safe-Haven Demand: During a recession, investors often seek safer assets, and government bonds are considered a safe-haven investment. This increased demand for bonds can push prices higher.

It’s important to note that market dynamics can be complex, and various factors can influence bond prices, including inflation expectations, credit risk, and overall market sentiment. Additionally, the specific response of bond markets can depend on how central banks and policymakers choose to address economic challenges.