Questions tagged [bonds]

Bond markets and legal aspects of bonds. For government debt use the tag "government debt" unless the fact the the debt is in the form of bonds has significance.

Filter by
Sorted by
Tagged with
0
votes
1answer
20 views

Why does the inverted yield curve occur with US Treasury securities?

I have also thought that US securities were considered nearly risk free as the government will almost always pay them back. So why is it the case that investors view short term securities as more ...
1
vote
2answers
26 views

Private Investment Impact on Bond Yields

From Japan to the US to Germany, we are currently seeing longer term bond yields falling at an alarming rate. I tune into a fair bit of economic commentary, and can often come to some sort of ...
0
votes
0answers
28 views

Why don't we have many-to-many lending yet?

Trying to research this for some time, but can't really find anything relevant. As it currently stands borrowing can be one-to-one: 1 customer borrows money from 1 bank. And can be one-to-many: 1 ...
1
vote
1answer
15 views

JNK and SPY price movements question

I am looking at the graph of JNK and SPY prices close prices since 2008. From 2008 to 2011, the two prices seem to move together. However, somewhere in the beginning of 2012, the prices all of a ...
0
votes
1answer
13 views

Euro BUND Future CTD Bond

I'm trying to understand valuation of the Euro BUND Future. As to my understanding, the price of the future should be: The price of a government bond issued by the Federal Republic of Germany That ...
2
votes
2answers
34 views

Relationship between default risk and value of bond

In particular Mortgage-backed securities. I've read from a book that underestimating the risk of default is tantamount to overestimating the value of the bond, giving rise to a bubble in MBS. I'm ...
1
vote
1answer
56 views

How to calculate standard deviation of a portfolio?

So i have this information: Suppose that 60% of your portfolio is invested in Johnson & Johnson (JNJ) and the remainder is invested in Ford. You expect that over the coming year JNJ will give a ...
0
votes
1answer
30 views

Neoclassical model with proportional taxes

In a certain economy, time is discrete with periods $t=0,1,2,...$. The economy is populated by many households and identical firms. The utility of a household is: $\displaystyle\sum^{\infty}_{t=0}\...
0
votes
1answer
47 views

Can a complex interaction term mean more than what it's composed of?

I'm cross-posting this question on both Economics and Cross Validated to get answers from a different perspective on each field. It is generally accepted to cross-post if the question is tailored to ...
1
vote
1answer
16 views

Extraction of Inflation Expectation from bond yields

In my introductory monetary economics course we have learned that inflation expectations can be calculated by comparing yields on index-linked and conventional bonds of equal maturity and assuming a ...
4
votes
1answer
65 views

Why is an inverted yield curve NOT a good predictor for recessions except in the US?

I am trying to better understand the mechanism (if there is one) behind an inverted yield curve predicting - or causing, as some would argue - a recession. In order to do that, I'm trying to ...
0
votes
0answers
8 views

Lease revenue bond literature

I can’t find anything that goes into to detail on how lease revenue bonds are a problem for municipalities or governments. I know the issuer(municipality) carries no liability on the bond. However, I ...
0
votes
1answer
36 views

Is it true that when the overall money supply decreases, that the demand for money decreases and the demand for bonds and securities both increase?

Is it true that when the overall money supply decreases, that the demand for money decreases and the demand for bonds and securities both increase? I understand that to increase the money supply, the ...
0
votes
0answers
9 views

Lehman brothers bond rating

Correct me if I'm wrong, but as far as I understand one of the greatest causes of the 2008 financial crisis revolved around the way Lehman brothers where rating mortgage-backed securities (giving a ...
1
vote
1answer
26 views

History of Municipal Bonds

Does anyone have a good book on the history of Muni Bonds that focuses on the reasons why they grew in popularity, adoption, and gov policy souring them. Background on why I need this info I am ...
0
votes
0answers
21 views

Why bonds held by foreign investors is greater than total bond issued?

Total bond issued is reported by BIS debt securities data. Let BIS denote this amount. Bonds held by foreign investors is reported by Balance of payment statistics (IMF). It is the portfolio debt ...
3
votes
1answer
32 views

Can debt to GDP ratio be reduced transfering debt to local autorities?

It is my understanding that not only government but also local authorities issue bonds. This answer on Money and Finance Stack Exchange suggests that such debts are not accounted in the computation of ...
1
vote
1answer
43 views

Isn’t a zero-coupon perpetual bond not worthless if the relevant government has some probability of buying them back?

A government issues perpetual bonds with no interest payments, no coupons: Most economists that are not hyper-dovish would argue such a bond is intrinsically worthless. However, if a government were ...
1
vote
1answer
30 views

Treasury Bond Default

I was listening to a podcast featuring Michael Lewis (author of Flashboys / Moneyball), who mentioned a Blackswan scenario where the administration would threaten to selectively not pay its Treasury ...
0
votes
2answers
36 views

Bond prices and Trade deficit

Why does the narrowing of trade deficit cause an increase in bond prices? I do understand that narrowing of trade deficit leads to narrowing of capital account surplus. Also, investor confidence ...
3
votes
2answers
37 views

Why is the ten year interest rate lower for Spain/UK bonds than for US?

Take a look at the government bonds interest rates, https://www.marketwatch.com/. For the US is 2.9, and for Spain and UK are 1.5 and 1.1 respectively. Spain is an economy with high unemployment, a ...
2
votes
2answers
85 views

Why do bonds pay back the entire principal at maturity instead of paying it off gradually?

Bonds usually pay interest only and the entire principal is paid back at maturity. On the other hand fixed rate retail loans pay back both interest and principal such that at the end no debt is ...
1
vote
0answers
11 views

Bond prices and Brexit

Hope this isn't too simple a question. I read an article that stated that the UK government and EU have reached a draft agreement for a Brexit deal, leading to the following market movements after ...
0
votes
2answers
48 views

Yield To Maturity exact meaning

From investopedia: "YTM is the total return anticipated on a bond if the bond is held until it matures" I have also seen this interpretation used in other sources however this seems wrong to me. ...
0
votes
3answers
95 views

Fixed-income investment in a low interest-rate environment

From an investment perspective, it seems to me that a low interest-rate environment can yield to some relatively "un-risky" profits. As the interest-rate can barely go lower, we now it should rise ...
1
vote
1answer
48 views

Who owns state bonds?

Let's take as an example the province of Quebec in Canada with a debt of $273B. It just elected a conservative and nationalistic government to lead the next 4 years. Their platform is that of fiscal ...
2
votes
1answer
41 views

How printed money gets to the commercial banks?

can you please clarify this for me? Gov't need money for deficit elimination, so they issuing bonds (lets say 1T, 10 years, 2%). Fed is buying the bonds with fresh money, so the gov't now has new 1T$ ...
2
votes
1answer
24 views

Yield curve flattening- abstract question

I just stopped and thought about the current economic state, and yield curve in particular. As you can see here, the yield curve is starting to flatten, means longer bonds demand is high, while short ...
0
votes
1answer
65 views

Explain some All countries excluding residents in BIS Debt Securities Data

In the BIS Debt Securities statistics: In both column "issueresidence" and column "issuenationality" there is a category called "All countries excluding residents". I do not understand what it means. ...
0
votes
1answer
74 views

Printing Money vs. Issuing International Bonds

I'm reading Niall Ferguson's The Ascent of Money and I had a question about the economic difference between printing money vs. selling bonds to foreign entities. At one point in the book, the author ...
0
votes
1answer
37 views

What portion of our annual deficit is financed by bonds?

What portion of our annual deficit is financed by bonds? Compared to say, treasury notes (such as checks and printed currency), or private lending?
0
votes
3answers
202 views

What do interest rates tell us about the state of an economy?

I seem to have a misconception about what interest rates mean. On one hand, they signal how high a government's demand for money is, because if a government is ever in any serious need of money, they ...
1
vote
0answers
25 views

How to determine the default probability of a county in a bond that is not in its native currency?

Consider the following case: Country P uses the currency Euro and gives p percent interest on a one year bond issued in Euro. Country Q uses the currency TL and gives q percent interest on a one ...
0
votes
1answer
61 views

Forward rate discounts

I'm working with the following task: "You are convinced that the bond market is dominated by long-term investors. Hence, you have your own view on the liquidity premium/discount that forward rates ...
2
votes
1answer
35 views

Where can I find data on market capitalization?

I am working on Home Equity/Bond Bias and need data to calculate the indicators of Home Equity Bias. So where can I find data on market capitalization (stocks and bonds) by year for each country? ...
5
votes
2answers
38 views

Why does the yield curve flatten?

I find the yield curve for bond rates confusing. For example, the current yield curve for US treasuries is shown below: The difference between the 10-year bond and the 30-year bond is tiny, just 0.15%...
0
votes
2answers
25 views

Prove that if a bond trades at a discount, its yield to maturity will exceed its coupon rate

Can someone give me a mathematical proof of this statement? If a bond trades at a discount, its yield to maturity will exceed its coupon rate.
0
votes
2answers
240 views

How does IS-LM model reduced investor confidence?

I am doing an essay on how a sovereign debt rating downgrade to junk status affects the economy. I wanted to use a theoretical framework to think about it, and seeing as an increase in the interest ...
1
vote
4answers
365 views

Why is it a problem if China starts “dumping” US Treasuries? What does it mean to be dumping?

China has 1.2 trillion dollars worth of us treasuries. Why would it be a problem for them to get rid of all of them? Why would that destabilize the US economy?
0
votes
1answer
82 views

Generic bond yileds

I was looking on historical sovereign bond yields for a project. I was wondering what is meant by "generic bond yields" mentioned on bloomberg. Somewhere else i found data about the same country but ...
1
vote
1answer
39 views

Are interest included in the computation of government debt

I am completely new to economics and I have troubles understanding how the government debt of countries is computed. Imagine government of country A issue some 10 years bond of the value of 100 ...
0
votes
1answer
29 views

Where to find the face value in a US treasury bond announcement

I am learning about the auction and bidding process of US 30 year treasury bonds. I am unable to locate the face (par) value of the bonds in official announcements (PDFs). For reference, here is a ...
0
votes
1answer
25 views

In US gov treasury auction, can the highest bidder force high prices for all others

In US treasury auction (for bonds and notes), my understanding is that the highest bidder's price (and rate) is applied for all the buyers. Assume a buyer 'A' who plans to buy a smaller number of ...
1
vote
1answer
71 views

In quantitative tightening do banks have no choice in refusing to buy bonds from Central Banks (mainly Federal Reserve)

In light of the recent unease about interest rate rise, I've been taking a growing interest in how our economy actually works, something I've been trying to avoid. So this forum is a way for me to ...
0
votes
1answer
92 views

Flat Term Structure and Immunized Portfolio Strategy

The current term structure is flat at 2%. You have a liability of $500,000 per year for the next five years. You decide to form an immunized portfolio. a) Describe your exact strategy if you ...
7
votes
2answers
353 views

Why is the inverted yield curve a good predictor of impending economic recession?

The inverted yield curve has often been cited as a good predictor of impending economic recession. What are the reasons to explain why is it a good predictor? Is the inverted yield curve a cause or ...
0
votes
1answer
25 views

Buy a company with credit or bonds. Does this happen?

I have a question. A company is worth 1 million dollars, in terms of present value of revenues, discounted at rate R. Can I borrow 1 million dollars from a bank and buy the company? If the bank ...
3
votes
1answer
71 views

Why does bond price tend to 100?

For example: if a bond got a 1% coupon, and tomorrow is the maturity date, so tomorrow I will have 101. So, in my opinion a bond price should tend to notional+coupon, because today I want this amount ...
2
votes
1answer
71 views

Do institutions buy debt with credit?

I am reading Money Power book, from 1932 (http://www.worldcat.org/title/money-power-and-human-life/oclc/3783026). The author explains how the War Loans in the UK worked. He says that the government ...
5
votes
1answer
83 views

How can the bond market be overvalued when the value of a bond is a function of interest rates?

I seem to have a major misconception in my understanding of the bond market and how interest rates and demand and supply influence valuation levels. I hope someone will be able to clarify. My ...