Tag: bond markets

The US Debt Ceiling Explained

The US Debt Ceiling Explained

Financial Markets Explained
The financial markets have built us a system wherein society, including governments thrive on debt. The simple premise being that the more you borrow to spend, the brighter the chances for an improving economy. Old-school thinking on the contrary is of the opinion that economic growth does not necessarily have to be based on debt and borrowing, but that's a different story. It is no wonder then, that money printing, or Quantitative Easing has become the primary tool for Central banks across the world to boost the economy. Ever heard of the phrase 'Do not live beyond your means?' Well that doesn't apply at a government level. Just so you know, the current US Debt Ceiling is at $US16.7 trillion which the Treasury Department alerted that it could be hit by mid-October 2013. The Debt-GDP ...
Operation Twist – What is it all about

Operation Twist – What is it all about

Economic Indicators
Operation Twist is a federal reserve monetary policy involving buying and selling of bonds in an effort to push down the interest rates on mid term and long term interest rates. In Operation Twist, the Federal reserve sells the short term or mid term treasury bonds and uses the cash to buy the long term treasury bonds thus generating demands and reducing the interest rates. In bond markets, when there is a demand for bonds the interest rates are low and vice versa. The term Operation Twist was named after the Chubby Checker song and was first tired in the 60's. The name comes due to the graphical representation it has on the yield curve. A typical yield curve has a linear upward sloping yield. The Operation Twist's actions aims to twist the end of the yield curve which gave rise to ...
Bond Market Trading Tips

Bond Market Trading Tips

Trading Articles
Trading in bonds is quite different to trading other markets such as Forex or Stocks. For first timers to bonds trading it can be intimidating to say the least as the terminology used in bonds investing is also different and includes references to the economy and math as well. In this article, we point out some bond market trading tips to bear in mind. For a primer on investing in bonds read this article. Bonds trading is not as complex as it seems. Of course terminology such as fixed income securities, debt instruments and so on are nothing more than an IOU differing slightly in terms of the returns they give and the maturity dates and the rate of interest. Investing in bonds is considered to be a safe investment. However, bonds are not immune to risk. The main aspect where bonds...