Relationship between Bond Prices and Yields

CFA Level II Fixed Income
#1

I am having a conundrum regarding the relationship between bond prices and yields. I am not sure if my mind has got in a twist or if it because of my lack of direct experience investing in fixed income securities.

So here goes, so in the current market environment investors are complaining about low yields on bonds due to the low rates, however if for example a US, or UK 10 year bond was bought 5 years ago it must have seen significant price appreciation due to falling rates. So an investor could sell this bond in the secondary market after 5 years to realize his gain? Parallel question do falling ie. low interest rates therefore not become irrelevant because I would always be compensated through rising bond prices?

Also on Bloomberg, they publish just one yield number for the US 10 year bond. Also, I do not know how to interpret this yield as surely it depends on when the bond was bought? I would appreciate if anyone with a little more fixed income experience can answer these questions. Thanks in advance!

#2

The complaints would most likely be in relation to allocating new money i.e. defensive exposures are paying less and less. The flow on impact from a portfolio perspective is that other asset classes are becoming increasingly expensive as investors are needing to chase yield through other exposures. This explains some of the reasoning behind inflated equity valuations across developed markets in particular, and also some of the strong performance across other ‘yield’ assets like REITs and infrastructure (which has certainly been dialed back in recent times).

#3

So its mostly in relationship to allocating new money then? Because if I bought a 10 year bond some years ago I am still fine today but if I want to allocate new money either way I am screwed because the current yields are low and if rates rise I am still screwed because the prices will fall?