If I understand correctly, the price of VBTLX would be expected to rise roughly 6% in response to 1% interest rate cut.
Is the price relationship truly this formulaic? E.g. in the absence of other Fed interest rate moves, would 2 points of cuts reliably produce a ~12% price increase in short order (~1 month)? Or could it take much longer (months) or not happen at all?
I would expect the price to start adjusting before cuts based on anticipation of cuts (as it does, daily); but I don’t know how to square the anticipatory dynamic with the “1% cut, 6% price increase” rule of thumb I’ve seen.
Thanks
Tim
Is the price relationship truly this formulaic? E.g. in the absence of other Fed interest rate moves, would 2 points of cuts reliably produce a ~12% price increase in short order (~1 month)? Or could it take much longer (months) or not happen at all?
I would expect the price to start adjusting before cuts based on anticipation of cuts (as it does, daily); but I don’t know how to square the anticipatory dynamic with the “1% cut, 6% price increase” rule of thumb I’ve seen.
Thanks
Tim
Statistics: Posted by chicagotj — Sat Jun 22, 2024 8:54 pm — Replies 0 — Views 73