Investing - Theory, News & General • ELI5: Bond Yield Increases Because...

I was trying to explain to my wife today why bond yields are increasing. This is what I told her:

The people and institutions who hold existing bonds are selling their bonds at a lower cost than what they bought them for. So if Mr. Bond (James Bond, naturally) bought a 10-year, $1000 bond that pays 3% a year last year, and the US government now issues 10-year bonds at 4%, Mr. Bond, instead of holding his bond to maturity (because he has to pay Q for some neat new gadgets), decides to sell on the secondary market. He sells his bonds for $950 (or whatever the optimal price would be). Because of this liquidation, the overall yield of the 10-year bond increases, because those bonds Mr. Bond sold are now part of the 10-year market.

In short, Mr. Bond's realized loss increases the overall yield.

I know this is a vastly simplified story, but is it even correct?

Statistics: Posted by sjwoo — Fri Aug 21, 2026 2:18 pm