Government bonds are debt securities that nation states issue in financial markets in order to finance some of their activities and services. An interest rate is applied to the securities and depends on the term of the loan, but also on the economic stability of the country that issues it. The “spread” is the difference in returns between the interest rates on government bonds from different countries.
One week into the new year and the money and bond markets have wasted no time generating headlines, with yield levels rising essentially across the spectrum of the United States Treasury (UST) maturities. Sometimes investors are left searching for answers for these type of quick and sizeable movements in rates, but this time around, the catalyst is abundantly clear, the Federal Reserve (Fed).
Continue readingOn the website "Investireoggi.it", a few days ago Giuseppe Timpone carried out an analysis of three sovereign bonds of three emerging countries, Turkey, Egypt and Ghana. Let's quickly see what conclusions he came to. Turkish bonds suffer from inflation and currency risk Ten-year Turkish bonds have fallen below $0.9 in recent days and their yields above 8%, compared to 6.32% a month earlier. The problem that has been plaguing Turkey in recent months is uncontrolled inflation, whic ...
Continue readingExcept for the European Central Bank and a few others, 2022 will be a year of rising interest rates. However, bonds will be able to take advantage of the boost offered by these rises only to a very limited extent. On the one hand, because the rises will be gradual so as not to produce economic shocks. On the other hand, because bonds will have to contend with inflation that is likely to remain higher than their yields. Slowly recovering bond yields The year 2022 and the announced shifts in mon ...
Continue readingWhat monetary policy should we expect in 2022? This was also the question posed by the German magazine FONDS Professionell, which interviewed a number of experts on the subject. Let's take a look at their overall view. Economic growth and inflation in 2022 Although it is difficult to make such a comprehensive forecast, almost all experts agree with the indicators pointing to global economic growth of around 4.5% during 2022. Except for China, whose growth is expected to stabilise at ...
Continue readingThe Financial Conduct Authority (FCA) warned customers not to deal with Fixed Rate Secured Bonds company. The regulator believes the firm is offering financial products and services in the UK without authorisation. The regulator added that it hadn’t authorised Fixed Rate Secured Bonds to operate in the UK, where the company is targeting clients. The regulator warned that if you deal with the firm, you wouldn’t have access to the Financial Ombudsman Service. That also means you ...
Continue readingThe NS&I’s much anticipated green bond went on sale last week, offering a paltry rate of 0.65%. That means, if you choose this three-year bond over other available offerings and max out your investment limit, you’re earning £3,600 less. The landmark bond comes only two weeks before the COP26 meeting to allow savers to back the government’s green initiatives. A savings expert mentioned that, at such low rates, the government might only rake in £100 million ...
Continue readingInvestors are starting to accept that a Bank of England (BoE) move to scale back support for UK gilts may happen sooner than expected. Traders are betting on a rise in the key interest rate to 0.5% by February. That’s when the bank could let gilts that mature out of its £875 billion asset purchase programme to roll out of the portfolio without replacement. As officials take a more hawkish tone and pressure build, moving to higher rates could happen as soon as March when a &pou ...
Continue readingMarkets are starting to conclude that, contrary to previous hopes, inflation is here to stay. Markets have been comparing inflation-linked and fixed-income bond yields and forecasting the implicit inflation rate. So far, the two, five, and 10-yields are perfectly positioned at almost 2%. Still, such comparisons might not always hold true. The implicit inflation rate, or breakeven, follows oil price fluctuations. Marc Chandler from Bannockburn Global Forex commented that the correlation ...
Continue readingUK bond yields are reflecting market concerns about the potential negative impact of a rapid policy tightening on growth. Long-end gilt yields reported their worst drop since March 2020 last Wednesday, only to continue their decline on Thursday. That led the gap compared to the two-year and five-year rates to tighten to its lowest in at least one year, signalling lower market optimism. US Treasury and German bond markets also reported flattening due to technical factors. Sti ...
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