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Tag Archive: Yield curve


Over the past few weeks, the economy of India has been in focus because of various factors such as decline in INR, slowdown in industrial image001production, etc. We keep reading a lot of articles that suggest that the policies of current government are responsible for this state of affairs.

A.Seshan in Businessline points to this known but seldom reported trend ongoing in India – inverted yield curve in G-sec markets:

A typical yield curve should be upward sloping indicating that the higher returns/rates/yields should be provided for taking higher risks which are generally over the long term. Similarly, lower returns/rates/yields should be for lower risks which are generally short term. In short, longer the time frame, higher should be the rate/yield that you should earn. Continue reading

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I do not know why but somebody wanted me to define some basics on Yield spreads, that whether Yield spreads can nick-leesonjudge 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 and entrepreneurial practices as well as a negative impact on the front of inflation. Continue reading

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

Let me revisit the basics on Yield spreads, that whether Yield spreads can judge the risk environment in an economy ?images

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 Continue reading

 

Yield Curve also called Term Structure of Interest Rates for a bond issuer, the structure of yields for bonds with different 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. Continue reading

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