When U.S. interest rates rise relative to interest rates prevailing overseas, a large-scale sell-off of U.S. bonds and stocks usually occurs as both U.S. and foreign investors buy more securities outside the U.S. in foreign markets, according to the textbook.

Question

Quizplus · Accepted Answer

When U.S. interest rates rise relative to those overseas, U.S. bonds and stocks often become more attractive to investors due to higher returns, potentially leading to an inflow of capital into the U.S. rather than a sell-off.

When US Interest Rates Rise Relative to Interest Rates Prevailing Overseas