Financial Markets For The Rest Of Us
An Easy Guide To Money, Bonds, Futures, Stocks, Options, And Mutual Funds
Page 64attractive relative to others, the pool of money is shifted from the outof- favor instruments to the favorable one. There are times when the prices of real estate, stocks, or precious metals are too high to justify or too volatile to stomach. In these cases investors siphon out their money from these investments and pour it into bonds, most notably the safe long bond. This is sometimes referred to as "flight to quality," where although bonds may not provide as sexy of a return as other investments, they have guaranteed income (interest payments) and, in the case of the long bond, are backed by the federal government. This demand for bonds causes their prices to move up. The reverse is also true when investors may decide to sell their bond holdings to move to other attractive investments. In that case bond prices drop in response to the sell-off.
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