QUICK DEFINITION
Forward Guidance is communication by a central bank intended to influence expectations about the future path of monetary policy.
WHY IT MATTERS
Why Forward Guidance matters in bond markets
Because bond prices reflect expected future rates, guidance can move yields even when the current policy rate does not change.
MARKET CONTEXT
How to think about it
Bond investors use forward guidance as part of a wider framework that links prices, yields, cash flows, liquidity and risk. The concept should therefore be read together with its related terms rather than as an isolated definition.
Is Forward Guidance important for fixed-income investors?
← Back to the Bond Market Glossary Yes. Because bond prices reflect expected future rates, guidance can move yields even when the current policy rate does not change.