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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.

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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. ...
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3answers
76 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 ...
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47 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 ...
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1answer
25 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$ ...
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1answer
18 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 ...
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Why holdings in offshore centers eventually wind up in the same pattern as those that go directly to other countries?

In this paper by Lane and Milesi-Ferretti (2008), the authors wrote: Nevertheless, to the extent that every dollar invested by a source country in an offshore center is invested by the offshore ...
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1answer
21 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. ...
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36 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 ...
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1answer
32 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?
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3answers
80 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 ...
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0answers
23 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 ...
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1answer
41 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 ...
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1answer
27 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? ...
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2answers
37 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%...
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2answers
20 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.
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2answers
76 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 ...
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Is there any stock issued in foreign currencies?

We have international bond issued in different currencies (domestic and foreign). Do we have the same fact for stocks? for example, my company in Switzerland may issue some stocks in CHF, can I issue ...
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4answers
216 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?
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28 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 ...
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1answer
37 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 ...
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1answer
27 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 ...
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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 ...
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1answer
45 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 ...
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1answer
51 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 ...
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Where to find enterprise 10-year Bond yields?

Are there any websites where we can easily search for any updated enterprise 10-year bond yields ?
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47 views

Masala Bonds related questions(doubts)

The Masala bonds are the bonds issued outside India but denominated in Indian rupees. They are also known as rupee bonds What are the benefits of these bonds? Indian entities issue Masala ...
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2answers
166 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 ...
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1answer
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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 ...
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1answer
56 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 ...
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1answer
45 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 ...
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1answer
70 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 ...
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1answer
36 views

How do you calcualte Yield To Maturity, given only the coupon rate and current required rate of return?

Suppose today a 10 per cent coupon bond sells at par. Two years from now, the required return on the same bond is 8 per cent. What is the YTM? ^That's a question I've been asked and have literally no ...
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1answer
287 views

Why obligation acceleration triggers Credit-Default Swaps (CDS)?

ISDA Credit Event definitions state that CDS can be triggered in an event of Obligation Acceleration. What does that mean? If for example, a country pays a bond 1 year prior to maturity are CDS ...
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1answer
132 views

Wealth - Bond Market and Liquidity Preference Framework

I've been told that an increase in wealth will lead to an increase in both the demand for Bonds determined by the Theory of Asset Demand. This should shift the bond curve to the right, increasing ...
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2answers
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Inability of a long-term bond market intervention to contribute to achieving a peg

In «The Federal Reserve's Large-scale Asset Purchase Programmes: Rationale and Effects» 2012 paper, there's the following sentence: According to the pure expectations theory of the term ...
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1answer
70 views

Wealth effect from OMO

In a paper by Eric Leeper he says: For example, a contractionary open-market sale of government bonds raises nominal interest rates, including yields on government bonds. If the higher debt ...
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1answer
67 views

Making mathematical sense of the expression for realized bond return

I came across the following statement regarding the realized 10-year maturity bond's return over a year: The realized bond return (H) over a year has two components: the yield income earned over ...
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1answer
498 views

What is the difference between quoted price and theoretical value of a bond?

When we refer to "quoted price" of bond, or "clean price", it is equivalent to refer to his "present value" or "theoretical value", which corresponds to the price that I invest in the bond? For ...
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Why would increased inflation increase the value of the dollar and bond yields?

I was reading this Fortune article (http://fortune.com/2016/11/14/donald-trump-victory-dollar-inflation/) and came across this confusing quote: "'Clearly the market has settled on a 'buy dollar' ...
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2answers
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Why are German bonds used as the reference for the calculation of Eurozone bond spreads?

I can't find the source, either on the the ECB homepage or any other internet source to verify why German bonds are used as a reference point in the eurozone when talking about risk spreads for other ...
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1answer
27 views

Buying/selling bonds more than once

Suppose the government of a country issues a bond. A certain bank buys that bond: The bank loaned a certain sum of money to the government. The government has to pay interest every x intervals of ...
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2answers
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CDO & CDS on medical patients

As far as my knowledge goes, a "collateralized debt obligation" (CDO) restructures existing bonds into "layers" of debt whereby each layer has similar kinds of bonds with similar kinds of features in ...
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2answers
71 views

Federal Reserve Interest

Banks have higher interest rate for debts than deposits to make money but does the U.S. treasury have the same interest rate for loans and deposits?
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1answer
289 views

Free Data Source for Credit Spreads?

Credit spreads are a key economic indicator. They are the difference between yields on corporate and government debt. They are a measure of confidence in the private sector, they provide insight into ...
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2answers
113 views

Financing U.S. government budget deficits, and their impact on interest rates

I have two questions. The first is about how exactly the U.S. government finances a budget deficit. The second is about the effects of budget deficits on financial markets and interest rates. Q1. We ...
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1answer
53 views

Could a hike in interest rates cause a country to be unable to pay back it's debt burden?

Sometimes I read in news articles, that a central bank can't hike the interest rates much higher, because then the government would be unable to pay the interest rate burden of it's government debt. ...
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2answers
1k views

Why would a central bank buy government bonds?

E.g. the Bank of Japan buying Japanese government bonds.
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1answer
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How is short-term borrowing by banks in the US performed?

I read a statement that one reason for persistent demand for US Treasuries is that US banks buy them because they can be used as collateral for acquiring short-term debt. I don't understand this. If ...
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1answer
32 views

Renminbi demand and CNY rates

I read something similar to here, http://www.businessinsider.com/onshore-and-offshore-renminbi-2014-2?IR=T, paragraph 6, that demand for renminbi drives down cny bond market? I can understand how ...
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How will perpetual floating rate bonds respond to tighter capital requirements?

Floating-rate perpetual bonds will tend to rise or hold value with increasing market interest rates (in contrast to fixed rate bonds, which tend to exhibit and inverse relationship between price and ...