<p>It all has to do with the yields of the bonds.
High bond prices = low yields. 
Low bond prices = high yields. </p>

<p>If the debt is narrowing (aka less debt), then that means investing in the bonds are safer. You do not get paid higher yields for safer investments. You get paid lower yields. So taking this into account, prices of bonds rise due to safer investments(because less debt), and bond yields go down.
Hope this helps.</p>

CC BY-SA 4.0
2019-05-08T18:56:01.193Z
2019-05-08T18:56:01.193Z
Clinical_Coder
<p>lower deficit means more export, so more foreign currency is coming into the country. Part of this goes to buy bonds. More demand means higher bond prices. People in the countr might feel richer too, because there is more exports, so more income to them. They might buy more bonds too. </p>

CC BY-SA 4.0
2018-12-09T17:06:54.607Z
2018-12-09T17:06:54.607Z
chatGPT
<p>Why does the narrowing of trade deficit cause an increase in bond prices? 
I do understand that narrowing of trade deficit leads to narrowing of capital account surplus. Also, investor confidence rises which might push the demand for bonds high and cause an increase in bond prices?</p>

<p>But is there any other reason?</p>

<macroeconomics><international-trade><bonds>
Bond prices and Trade deficit
user585380
# Bond prices and Trade deficit

(Asked by: username_0 on 2018-12-08)

Why does the narrowing of trade deficit cause an increase in bond prices?
I do understand that narrowing of trade deficit leads to narrowing of capital account surplus. Also, investor confidence rises which might push the demand for bonds high and cause an increase in bond prices?

But is there any other reason?

**Tags:** macroeconomics, international-trade, bonds

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## 2 answers

### Answer by username_1 on 2019-05-08. Score: 1

It all has to do with the yields of the bonds.
High bond prices = low yields.
Low bond prices = high yields.

If the debt is narrowing (aka less debt), then that means investing in the bonds are safer. You do not get paid higher yields for safer investments. You get paid lower yields. So taking this into account, prices of bonds rise due to safer investments(because less debt), and bond yields go down.
Hope this helps.


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### Answer by username_2 on 2018-12-09. Score: 1

lower deficit means more export, so more foreign currency is coming into the country. Part of this goes to buy bonds. More demand means higher bond prices. People in the countr might feel richer too, because there is more exports, so more income to them. They might buy more bonds too.


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