<p>The question as posed doesn't make sense to me. An increase in the market interest rate will reduce the price of current bond holdings precisely because they become less attractive since there are now more profitable alternatives in the market. Market forces will lower the price of the bonds in response to the increase in expected future coupon streams from these alternatives.</p>

CC BY-SA 3.0
2018-01-19T23:27:46.077Z
2018-01-19T23:43:09.650Z
2018-01-19T23:43:09.650Z
Kenneth Rios
<p>How can an increase in the interest rate make bonds more attractive and reduce their price? </p>

CC BY-SA 3.0
2018-01-19T02:28:17.593Z
Did you observe these effect in practice? Your question seems a bit unclear as it is.
JoaoBotelho
<macroeconomics><monetary-policy>
Financial markets, money demands
user451954
# Financial markets, money demands

(Asked by: username_0 on 2018-01-18)

How can an increase in the interest rate make bonds more attractive and reduce their price?

**Tags:** macroeconomics, monetary-policy

> **Comments:**
> **username_1**: Did you observe these effect in practice? Your question seems a bit unclear as it is.  

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## 1 answers

### Answer by username_2 on 2018-01-19. Score: 1

The question as posed doesn't make sense to me. An increase in the market interest rate will reduce the price of current bond holdings precisely because they become less attractive since there are now more profitable alternatives in the market. Market forces will lower the price of the bonds in response to the increase in expected future coupon streams from these alternatives.


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