If bond portfolio managers expect interest rates to increase in the future, they would likely ____ their holdings of bonds now, which could cause the prices of bonds to ____ as a result of their actions.

Question

Quizplus · Accepted Answer

When bond portfolio managers expect interest rates to increase, they are likely to decrease their holdings of bonds to avoid the decrease in bond prices that typically accompanies rising interest rates. This selling pressure can lead to a decrease in bond prices.

If Bond Portfolio Managers Expect Interest Rates to Increase in the Future