Deflation is good for lenders. Inflation is good for borrowers. Why? It all has to do with the future real value of money. If a dollar in the future is worth more than a dollar today, it becomes increasingly expensive (in real terms) to service debt and increasingly beneficial to receive coupon payments. When dollars become more valuable, purchasing power rises. This means you can buy more stuff with the same amount of money. (In reality, most of the time future dollars are worth less than today's dollars due to inflation.)
Why Deflation is Good for Bond Investors
Why Deflation is Good for Bond Investors
Why Deflation is Good for Bond Investors
Deflation is good for lenders. Inflation is good for borrowers. Why? It all has to do with the future real value of money. If a dollar in the future is worth more than a dollar today, it becomes increasingly expensive (in real terms) to service debt and increasingly beneficial to receive coupon payments. When dollars become more valuable, purchasing power rises. This means you can buy more stuff with the same amount of money. (In reality, most of the time future dollars are worth less than today's dollars due to inflation.)