Bond prices (and bond yields) are determined by supply and demand in the bond market.

a. The higher the price, the larger the quantity of bonds supplied.

b. The higher the price, the smaller the quantity of bonds demanded.

c. The supply of bonds rises when:

i. Governments need to borrow more.

ii. General business conditions improve.

iii. Expected inflation rises.

d. The demand for bonds rises when:

i. Wealth increases.

ii. Expected inflation falls.

iii. The expected return, relative to other investments, rises.

iv. The expected future interest rate falls.

v. Bonds become less risky relative to other investments.

vi. Bonds become more liquid relative to other investments.