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Treasury bond prices and yields | Stocks and bonds | Finance & Capital Markets | Khan Academy

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Why yields go down when prices go up. Created by Sal Khan. Watch the next lesson: https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/bonds-tutorial/v/annual-interest-varying-with-debt-maturity?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Missed the previous lesson? Watch here: https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/bonds-tutorial/v/relationship-between-bond-prices-and-interest-rates?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Finance and capital markets on Khan Academy: Both corporations and governments can borrow money by selling bonds. This tutorial explains how this works and how bond prices relate to interest rates. In general, understanding this not only helps you with your own investing, but gives you a lens on the entire global economy. About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We've also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content. For free. For everyone. Forever. #YouCanLearnAnything Subscribe to Khan Academy’s Finance and Capital Markets channel: https://www.youtube.com/channel/UCQ1Rt02HirUvBK2D2-ZO_2g?sub_confirmation=1 Subscribe to Khan Academy: https://www.youtube.com/subscription_center?add_user=khanacademy
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Text Comments (57)
LiuYe (2 months ago)
Not sure how you can acquire 5 percent returns if the govt isnt printing 5 percent more money or the banks arent printing it through lending. Or maybe through FDI. The money could come from taxes. But people hate paying taxes and incomes would fall every year if money was siphoned ever year to pay off foreign banks. It cant come from trade surpluses. america doesnt post any. Cant be from american corporate profits abroad. Because america posts negative current account balances. So I can only imagine the money comes from printing money and foreign investment in exchange for american assets. So this might benefit individuals from foreign countries. But it doesnt benefit foreign nation states. Since the assets are largely useless geopolitically.
david alford (3 months ago)
ForgottenKnight1 (3 months ago)
Lending 950 dollars to get 1000 dollars over the course of 1 year, is a 5% yearly performance, meaning about 0,42 monthly performance. I think that if people want to get into this kind of stuff, they should learn some trading basics, be it FOREX, stocks, futures, whatever. 5% yearly performance is easily achievable even for a beginner.
Jose S.A. (3 months ago)
Great explanation. Could you apply this to yesterday's event of Treasury bonds massive selling? Seems weird to see that markets fall if bond yields increases.
LiuYe (2 months ago)
Because bond payments are guaranteed. The govt can just print money. So its safer to buy govt bonds than it is the stock market. Private companies cant print money. They have sell stock or sell goods.
Randy M (3 months ago)
Why is it 5.3% and not 5%?
50/950, not 50/1000.
DanKest (4 months ago)
This isn't finance, its 2nd grade math. why put stocks in title if it has nothing to do with the correlation between bond yields and the stock market?
Reid Norris (6 months ago)
we just %100 debt/gdp today. i know that swiss is at %127/gdp. the swiss have the gold and the US has the military
LiuYe (2 months ago)
us military is weak. If you had a strong military. You wouldnt even need to borrow from foreign banks. You would just force countries to pay tribute. There would be no debtor status. Mafia bosses and loan sharks go around breaking legs when people cant pay up. Not the other around
Jamie (7 months ago)
This guy is so good!
alfredkwaak (7 months ago)
why is 5% 5.3%
atletico ATM (8 days ago)
He actually complicated things in the example at 2:30. Its 5.26%. He rounded it up. Just divide the gain of $50 by the face value of ($950) and you will get (0.0526). The yeild is often in percentage. To get it, multiply it by (100) and you will get (%52.6).
TheHotcrumbs (8 months ago)
teljnyazhka (9 months ago)
Thank You sir, you are an awesome teacher
Mohammad Shehzad (9 months ago)
I would be grateful if you could upload a video explaining the relationship between the dollar price, yield and gold price. It is very complex and I have failed to understand it.
Antonio Aguilar (11 months ago)
superb explanation!!! thank you!
alex j (11 months ago)
wait until these bond yields go to historically normal levels , the govt will have to default on its obligations and there will be to be a restructuring.
Katrina McIntyre (11 months ago)
January 19, 2018: "The threshing floors will be full of grain, and the vats will overflow with the new wine and oil. Then I will make up to you for the years that the swarming locust has eaten, the creeping locust, the stripping locust and the gnawing locust, my great army which I sent among you. You will have plenty to eat and be satisfied and praise the name of the LORD your God, who has dealt wondrously with you; then my people will never be put to shame." Joel 2:25 KATE
Lonnie Atterbury (1 year ago)
this video was informative but seems to be over complicating things. please someone correct me if im wrong. Forget all the percent and yield information. i give the government 950 and the promise to give me 1000. 50 dollar in profit. what benift do i have of doing this? why would anyone do this am i missing something. please explain thank you because i can make more of a return with a 12 month Cd at a bank.
Brian Jin (10 months ago)
A thousand dollars isn't worth it lol, try 10 mil. For larger amounts of money it makes a little more sense. But typically people would diversify their investments more.
Emmanuel Ochoa (1 year ago)
What if the government loses money during the time of the loan you've made them. Would they still pay you?
Hachi de Fibonacci (1 year ago)
C4C - stop investing in us bonds. dubai is the present. usa economy is doomed. the new president will surely attempt to stimulate the economy however it will be short lived. take a look at what is going on in dubai. http://www.nasdaqdubai.com/ http://www.bloomberg.com/news/articles/2014-04-22/dubai-said-to-plan-sale-of-15-year-sukuk-as-early-as-today
That's a 5.3 percent return
alfredkwaak (7 months ago)
50 out of 1000= 5%
TheBrianEffect101 (1 year ago)
so you literally only make like 50 bucks for a year investment, thats pretty terrible
atletico ATM (8 days ago)
+Lonnie Atterbury Investors buy bonds in scales. A 5% yeild (50 bucks return for every ($1000) is amazing. One hundred million of these bonds, get you $5M every year. But who have this money? Americans often put their money in mutual funds to pool their investments and create scale. The investor who tooy your money will buy these bonds which are traded in the market but the government can sell you directly at a minimum of 5 millions of these bonds in auctions that happen several time every year.
NathanRyanAllen (12 days ago)
This is why bonds are generally a better investment as you grow older and move closer to retirement. Under 50 should not be heavily invested in bonds.
Brian Jin (10 months ago)
Its just one safe bet to put your money if you don't want to go into riskier investments. Higher rewards come with higher risk. But people with say an extra 20 mil lying around and they don't know where to put the money investment wise, compared to letting the money lose value in a checking/savings acct they can buy treasury bonds and get that type of % back guaranteed. Thats the whole idea, it's just a tool. You use the proper tool for investment returns you are looking for. Say you wanted to just live off the interest (boring I know) but if you had 10mil lets say you get a 3% return thats 300k before taxes etc... just something to think about. I mean I wouldn't spend all that money just buying tbills. Depending on my age, financial situation, risk appetite I'd diversify into stocks, index funds etc.
Crypto Thought (10 months ago)
blackearl7891 You got a point
blackearl7891 (10 months ago)
Crypto Thought why wouldn't you want more
Clara Van Biesebroeck (1 year ago)
Good explanation, good pace, clear tone of voice, perfect! Thank you!
leepsoi (9 months ago)
at 1.5x speed
Hi...i would like to know the "perfect range" that a gov bond say 10Y yield should have for example the US economy?
Alexis Lye (2 years ago)
thnk you!
Nilesh Parmar (2 years ago)
Excellent. Keep up the good educational work.
Dalia LP (2 years ago)
like your voice,
Corporate Algorithm (3 years ago)
Awesome explanation
Nice, simple explanation. See also - https://www.linkedin.com/pulse/t-bill-trajectory-early-warning-signs-public-debt-smith-phd
Jason V. Kennedy (3 years ago)
Great explaination
Ziah Hayat (4 years ago)
Great explanation on #bonds! #money
Brent Brady (4 years ago)
Thank you.
finarrykahn13 (4 years ago)
Please continue what you do.  These are the best illustrations of macroeconomic principles. 
jextreme22 (5 years ago)
Correct me if I'm wrong but I thought treasury bills mature at 1 year or less, treasury notes mature between 1 - 10 years and treasury bonds mature at over 10 years... Why is the title treasury bond and then he talks about a 1 year maturity. I'm confused :(
The Part Time Economist (2 months ago)
You are correct on the terms. Other than the difference in names, all of what he is saying still applies to notes, bills, or bonds. Although it was a slip up, the information can still apply.
Peter Heide (5 years ago)
Rothschild and his Jewish buddies murdered our for-Fathers on the Titanic 1912 that were against the establishment of the FED which gave the Satanist Jews a bottomless Ocean of phony cash to train non-Jewish militarists to go and murdering innocent non-Jewish people all over the world because the lying Jewish Medias labels them Theorists. Support our troops? Using phony money as value of exchange? Phony money that is used to kill all non-Jews? Force your eyes open!!! And do not use phony money as value of exchange!!! See how we are enslaved as Police, Militarists to dance to the Jewish Phony money. Committing genocide to non-Jews is the Jewish aim. Save the children!!!  And pass it on!!!
ApartmentTrustees.com (5 years ago)
Excellent presentation ... well done!
tifius (5 years ago)
Not necessarily unsustainable. What's unsustainable is having a large debt to GDP ratio. If an economy has growth then borrowing matching that growth isn't really a problem as long as debt to GDP-ratios stay in control.
orochimarujes (5 years ago)
The government needs money for whatever billion dollar projects, departments, and wars they need to finance, so they simply borrow the money from "investors" at interest. What you and I would call a contract for repayment, the government calls bonds. It's just wordplay. This puts the government in debt. What happens when the investors want their money back and the government is only in MORE dept than before? Either print money (inflation) or borrow to put printing off until later. Unsustainable.
Kuziai (5 years ago)
AnnexGroup (6 years ago)
Thanks for sharing.
Roger Rogers (7 years ago)
Love the 4 minute videos. Perfect for when I don't have time or energy to delve into science or math, I can just kick it and learn about the treasury and hedge funds!
junior1984able (7 years ago)
anyone wants to be my nerdy friend??

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