One number from the bond market can decide whether your next deal looks cheap or expensive. Private deal investors sometimes think the bond market only matters to stock and bond investors. In fact, it sets the risk-free rate used in valuation models.
If that risk-free rate rises, the hurdle a private deal must clear to be attractive goes up. If bond yields fall, it’s easier for a private deal to be profitable. Understanding the broader market can change how you look at the deal in front of you.
Key points
- The bond market sets the risk-free rate used in valuation models.
- Higher rates raise the hurdle for private deals.
- Lower yields make it easier for private deals to look attractive.
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