Bond prices have an inverse relationship with interest rates. This means that when interest rates go up, bond prices go down and when interest rates go down, bond prices go up.
The two are correlated. A well-known maxim of bond investing is that when interest rates fall, bond prices rise, and vice versa. This is also referred to as interest rate risk. And some bonds are more sensitive to interest rate changes than others.
Simply put, if the real interest rate increases, firms will demand less investment. Conversely, if the real interest rate decreases, firms will demand more investment, other things being equal.
Bond prices have an inverse relationship with interest rates. This means that when interest rates go up, bond prices go down and when interest rates go down, bond prices go up.