Yield Curve and Bond Basics

Yield Curve also called Term Structure of Interest Rates for a bond issuer, the structure of yields for bonds with Woman Doing Calculationsdifferent terms to maturity (but no other differences) is called Term Structure of Interest Rates.

The relationship between and yield on a similar risk class of securities is called the Yield Curve. The relationship represents the time value of money  showing that people would demand a positive rate of return on the money they are willing to part today for a payback into the future. It also shows that a Rupee payable in the future is worth less today because of the relationship between time and money. A yield curve can be positive, neutral or flat.A positive yield curve, which is most natural, is when the slope of the curve is positive, i.e. the yield at the longer end is higher than at the shorter end of the time axis. This result as people demand higher compensation for parting their money for a longer time into the future. A neutral yield curve is that which has a zero slope, i.e. is flat across time. Continue reading


When the GDP number came out for the Indian economy grew at 5.3% in the fourth quarter of the last fiscal. Impacting the expectation of India growth story of growing more than 7%. The 10-year bond yields fell 3 basis points to 8.49% as concerns over global risk aversion lured investors towards safe-haven government debt.

In the mean time some of my friends wanted to understand the impact Continue reading

The more you read write, the lesser it is. I have done number of articles on this topic as it’s a hot selling cake in moribund financial market. The Standard & Poor’s 500 Index sank 1.1 percent to 1,338.35, the lowest level since February, as Greece struggled to form a new government amid mounting concern the nation may leave the euro.

Well the latest is Facebook IPO: Oversubscribed, social network set to close books – WSJ reported. Continue reading

I do not know why but somebody wanted me to define some basics on Yield spreads, that whether Yield spreads can judge the risk environment in an economy ?

Yield spreads are good tools to judge the risk environment in an economy a lower yield spread means that the issuer of debt is in a situation to demand loans at a lower spread above the yield of government security which in turn shows the presence of ample liquidity.

As far as economic growth is concerned a lower yield spread indicates greater amount of liquidity available for growth Continue reading

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