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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52 views

Why is the Australian Government financing the stimulus via debt rather than the RBA?

The Australian Government is engaging in quantitative easing for the first time. The RBA is creating money that is being used to buy bonds on the secondary market so that there is enough liquidity for ...
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2answers
53 views

Dynamic of 10 year UST given supply shock of the bonds that the Fed will buy into

It looks like the US government are gonna issue a lot of bonds in the near future. Basic demand/supply implies that this will lower the price of those bonds i.e higher yields. At the same time it ...
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1answer
25 views

Why are the YTMs of TIPS of longer maturities more sensitive to current interest rates and inflation rates?

According to this website, the yields of TIPS of longer maturities are greater than that of TIPS of shorter maturities. It seems counterintuitive since yields of longer-maturity bonds, which are based ...
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1answer
41 views

Why would governments sell bonds when the economy is in recovery? [closed]

China confident of meeting 2020 fiscal targets, CGTN, 7 August 2020. The article states that China is selling "special government bonds". Why do this? Especially when economy is just ...
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2answers
95 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
46 views

Why did the US credit rating downgrade in 2011 decrease US government bond yields?

I'm not sure how bond yields were decreased by the US credit rating downgrade in 2011. Since the credit rating is down, shouldn't the yields increase since the US government wants to attract more ...
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1answer
41 views

How does buying bonds reduce bond yield?

I read that Japan rapidly increased the printing of Yen and used the money to buy government bonds. How did this action reduce the yields of their government bonds and prevent them from having a debt ...
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1answer
27 views

Does bond yield always equal the prevailing bank interest rates?

Does a bond's yield (principal and coupon rate) always equal the bank interest rate?
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0answers
15 views

Is Mortgage-backed security something investors can buy? [migrated]

Is Mortgage-backed security something the investors can buy? If yes then what makes MBS a bad investment?
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2answers
33 views

Was there a drop in liquidity in the corporate bond market during the Global Financial Crisis?

It is often said that the increase in the perceived default risk led to a fall in the demand for the corporate bonds. This led to the fall in their prices and hence, their interest rates rose ...
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1answer
46 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 ...
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1answer
21 views

Even at the break-even inflation rate, isn't the YTM of a TIPS greater than that of a normal treasury bond?

At a the break-even rate of inflation, the semi-annual interest payments from a TIPS and a normal government bond would be roughly equivalent. However, the principal amount originally invested in the ...
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2answers
56 views

Correlation between nominal bond returns and growth

I read the following passage and the bolded section has me confused: In theory, assets earn a low (or negative) risk premium if they tend to perform well when the economy is weak. When growth ...
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1answer
38 views

What is the effect on GDP when foreigners buy lots of domestic bonds?

I am trying to figure out the effect on GDP of foreigners buying lots of domestic bonds. From what I understand, when foreigners buy lots of domestic bonds: They need to convert their foreign ...
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1answer
61 views

Is the money market model based on assumption of no interest rate targeting on the part of the central bank?

This is quote from Gregory Mankiw's macroeconomics text about mechanism of formation of the interest rate in the money market model: How does the interest rate get to this equilibrium of money supply ...
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2answers
69 views

Why does Samuelson say common stocks are better than bonds and preferred stocks during inflation?

I’m reading the first edition of Paul Samuelson’s Economics (1948). In Chapter 6, “Business Organization and Income,” after describing bonds, preferred stocks, and common stocks, he writes: To test ...
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1answer
57 views

How does the Fed's stimulus push stocks markets higher?

I read that the Fed’s stimulus last March has contributed to a spectacular rally in stock markets. And indeed S&P500 has increased a lot since March. But how does the mechanism work? How does the ...
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0answers
47 views

Does China issue treasury bonds too?

The USA is issuing a lot of treasury bonds and investors are buying it. But does China issue such bonds too? If yes, then how many such bonds did they issued and who are the largest owners of those ...
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1answer
239 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
271 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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1answer
32 views

Are coupons all semi-annual?

How do coupons get priced in together?
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1answer
26 views

How do you benefit from a fall in interest rates in general as a creditor of public bonds?

I’m reading about England debt in 1819 and how interest rate benefited its creditors. The country had a public debt of more than 250% of the GDP. With peace at last achieved, London is faced with a ...
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1answer
52 views

Nelson-Siegel-Svensson method

I am a college student and I have recently learned about Nelson-Siegel-Svensson method which is used by the German Federal Bank to determine the yield curve. I have to generate yield curves of ...
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0answers
35 views

How could Euro bonds serve as a “safe haven” asset in the long run?

The German Bund has been the major safe-haven asset in the Eurozone despite the advent of the Euro. However, I noticed that there is mounting anticipation around a potential 750 billion worth of Euro ...
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2answers
33 views

Bondholder vs purchaser of bond

Kindly clarify if the term bondholder refers to the bond issuing authority or the person who purchases the bond. Context: if there's inflation in the economy, bondholder will lose and the person who ...
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2answers
74 views

Are quantitative easing and helicopter cash really different tactics? And how does QE relate to Modern Monetary Theory?

I've been trying to get a clear understanding of exactly what economists mean by Quantitative Easing (QE). It seems to me that different people mean different things by it. I find simplistic analogies ...
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1answer
70 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 ...
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1answer
28 views

Is there inverse relationship betweet prices of interest-bearing assets and the interest rate?

I was wondering about why investors converting out of interest-bearing assets into money in the money market cause the interest rate to increase. Then I remembered that there is inverse relationship ...
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1answer
44 views

Are government bonds internal or external debt?

I was watching this video and since it's a bit oversimplified I wanted more information. I was curious because internal debt is in the local currency from local lenders, while external debt is in a ...
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1answer
98 views

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

I have always 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 currently view short term securities ...
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1answer
32 views

What does the Fed do with their profits?

As far as I understand the system the Fed prints money which it then uses to buy bonds. Bonds are basically statements of debt meaning that the Fed receives interest from the parties it has bought the ...
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2answers
49 views

Why does the Fed feel the need to reduce its balance sheet? [closed]

Why does the Fed feel the need to reduce its balance sheet? What is the problem with the Fed having a large balance sheet long term? What would happen if the value on the Fed's balance sheet ...
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2answers
420 views

Limits to Quantitative Easing Programmes

I have been reading recently on the quantitative easing programmes by the ECB and the BOJ, see http://www.cnbc.com/2016/04/07/what-the-bank-of-japan-boj-will-do-now-that-negative-rates-have-...
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4answers
4k views

Why do people buy negative interest rate bonds?

I get that people buy long term government bonds, because of how safe it is, and if there would be a recession the government would just print more money and could pay it back. But why would anyone ...
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1answer
35 views

Real yields and growth [closed]

Found the following very interesting statement on bond prices, "The yield on a risk-free government bond should equal the growth in nominal GDP since that represents the opportunity cost of holding a ...
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1answer
56 views

What determined the “cost of borrowing money” or the interest rate in a gold-based economy

In the modern economy, the central bank decides the cost of borrowing money using interest rates along with other several tools and technic. But I was wondering, in a gold-based economy (not the gold ...
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28 views

Why does US Treasury Bond Futures Chart show two separate curves?

I was surprised to see following on Yahoo Finance. Why did the chart branch into the green and orange functions? Does the chart show 2 separate prices on the chart?
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0answers
28 views

In credit easing, how do central banks avoid allegations of unequal treatment?

In credit easing, central banks purchase private assets such as corporate bonds. How do central banks choose which corporate bonds to buy? If the central bank buys bonds of one company but not those ...
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3answers
39 views

When the federal reserve buys bonds or other assets from banks, do the banks make a profit?

My understanding is that the federal reserve is injecting money in the market by buying bonds and debt from banks. Do the banks make a profit on the sale of their bonds or corporate debt to the feds?...
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1answer
36 views

Local vs. foreign currency denomination for Emerging Market Bonds

For emerging market governments, why is it safer to issue bonds in local currencies than in foreign currencies to raise money? Given that both are invested in by foreign investors, couldn't both ...
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1answer
55 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}\...
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3answers
631 views

If I don't pay a debt, then the creditor takes my goods. Why, then, do Greek creditors not take Greece?

Normally, when you don't pay a debt, your creditors take your goods (house, car, etc). If Greece cannot pay its debt, can its creditors take Greek goods (structures, cities, industries, lands, etc)? ...
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1answer
245 views

Why does falling global bond yields signal coming deflation?

This article suggests that, "Bond markets are signalling something very nasty coming down the road at us – an all encompassing, worldwide deflation. " I cannot understand why bond yields falling ...
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3answers
705 views

Why is national debt bad if the central bank can keep buying bonds?

When I read about national debt, it's usually about how debt is bad because with too much debt, debtors would demand higher interest rates. Eventually the government can't pay the interest, defaults, ...
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2answers
869 views

Why would China and Russia selling the US' debt ruin the economy?

I was listening to an interview with David Harvey and he mentioned that if Russia and China were to sell the debt owed to them by the US, the US economy would take a serious dive. How would they sell ...
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0answers
17 views

What estimation method is best to conduct event study on non standard monetary policy?

I have collected bond yield data from 01/01/2008:31/12/2019 for several euro-zone countries. I would like to conduct an event study analysis of the main Non standard measures announced by central ...
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1answer
46 views

Where can I find charts with the amount of treasuries in existence?

Is there a place where I can see a chart with the amount of treasuries in existence organized by treasury type? Ideally it would be a resource that has multiple charts (for bills, notes, bonds etc...)...
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1answer
53 views

Greek Debt Crisis

If the Greek government defaults on its bonds issued by French and German investment banks, how does that prevent the French and German governments from paying back the money that they owe to ...
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2answers
113 views

How did Portugal draw down their interest rates on pubic debt?

I notice that Portugal had a very high interest rate on its national bond issues back in 2012 but since then it has drawn down significantly: How were they able to decrease the interest rate?
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2answers
4k views

What would happen if China called in its debt?

I was talking with a friend of mine the other day about Trump putting the 35% tax on all overseas manufacturing. Couldn't this hurt those countries that have plants where US manufacturing comes from? ...