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Suppose there has been some release of data that shows economic slowdown, or increased expectations of inflation. Investors will then sell their bonds in hope of buying newer bonds with higher yielding debt. Is this the correct rationale behind sell-offs. Furthermore, when those bonds are sold, what will the proceeds be invested in while they wait for yields to adjust to new market expectations?

  • "when those bonds are sold, what will the proceeds be invested in while they wait for yields to adjust to new market expectations?" Cash, presumably, or short term CDs. – RonJohn Nov 19 at 6:03
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    "release of data that shows economic slowdown ... Investors will then sell their bonds in hope of buying newer bonds with higher yielding debt." I challenge the notion that interest rates always rise during recessions. That sure didn't happen 12 years ago. – RonJohn Nov 19 at 6:05
  • Some of us don't bother to try to time the market, just buy more in our current allocation as our income dictates. – Pete B. Nov 19 at 11:47
  • The Federal Reserve has cut interest rates three times in 2019 as the US economy slowed. The 10 year Treasury has dropped 90 basis rates this year. When rates drop, bond prices are rising. Why would someone looking to buy higher yielding debt be selling at this time? They'd be waiting for 'signs' of the economy picking up. – Bob Baerker Nov 19 at 12:38
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    @paulj comparing markets to a train track represents a fundamental misunderstanding of markets, or of train tracks. – Pete B. Nov 19 at 14:33

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