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The Bloomberg Barclays GBP Non-Government Float Adjusted Bond has fallen down dramatically during February 2021.

However, the UK interest rates are historically low (font: when will interest rates rise.

As far as I understand, bonds rise in price if interest rates fall, because the yesterday's bond is better than the today's one. Then, shouldn't bond indexes keep going up until the BOE rises interest rates again?

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The base rate is a specific rate the bank of England sets that heavily impacts banks and consumer debt, but sits independently from longer dated UK bonds, and even further removed from non government longer dated bonds.

The overall yield curve (which is what matters to a fund full of bonds of various dates and quality), moves a lot even for UK gilts as the market tries to predict future valuations, eg:

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  • So you mean that interest rates don't affect long term government bonds, and even less to long term corporate bonds?
    – Martel
    Mar 1 at 12:55
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    The base rate does affect government bonds partially (eg will drag very short term ones down very close to it), and will also have some impact on corporate bonds, but the correlation is far too weak to do anything like anchor it to the base rate etc.
    – Philip
    Mar 1 at 13:46
  • I see in that curve that 15 year bonds (in the 26 Feb curve) have a yield of ~1.8 (is this yield the same as discount rate?), while 35-40 years have 1. This is a very strange situation indicating a recession, caused by COVID19, is this correct?
    – Martel
    Mar 18 at 17:36
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    This is referred to as a partially inverted yield curve and can have a variety of causes/meanings: investopedia.com/terms/i/invertedyieldcurve.asp
    – Philip
    Mar 19 at 9:17

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