The Incredible Upside-Down Fixed-Income Market: Negative Interest Rates and Their Implications The Incredible Upside-Down Fixed-Income Market: Negative Interest Rates and Their Implications

The Incredible Upside-Down Fixed-Income Market: Negative Interest Rates and Their Implications

    • 2.0 • 1 Rating

Publisher Description

In recorded financial history, there are almost no occasions, other than the present, where a significant portion of the global bond markets has been trading at negative nominal yields. Is this an anomaly or what will be the normal state of the financial markets in years to come?



This monograph investigates the ongoing debate between the pros and cons of negative nominal yields and the economic rationale(s) that are used to justify or criticize underlying policies. Even in academic circles, few agree on the costs and benefits of negative yields.



Surveying the global bond markets of the day, I find the impact of negative yields in almost all regions and sectors, though sovereign bond markets, which are closest to monetary policy, are the dominant category of bonds with negative yields.



I next look at the participants in the negatively yielding bond market and at the motivations that justify their actions. The conclusion is that although different participants might have different reasons to buy negatively yielding bonds, their collective action is certainly responsible for creating a local equilibrium in which these markets clear.



Central bank policy is the next focus in this monograph, and I discuss in depth the economic rationale as propounded by one such bank, the European Central Bank. I conclude with a discussion of the blurring lines between monetary and fiscal policy, which are likely to become centerpieces in future years as global sovereign debt levels rise.



Next, I look at the influence of negative yields on other asset markets, such as equities, and especially derivatives markets, such as the demand for options. A discussion of potential risks then follows. The monograph concludes with a review of the impact of negative yields on nonfinancial aspects of society.



Although the forecast is anything but crystal clear, the evolution of markets and economics in the years to come will undoubtedly be influenced by this massive economic experiment of negative yields.

GENRE
Business & Personal Finance
RELEASED
2021
June 29
LANGUAGE
EN
English
LENGTH
152
Pages
PUBLISHER
CFA Institute Research Foundation
SELLER
RESEARCH FOUNDATION OF CFA INSTITUTE
SIZE
6.3
MB

More Books Like This

The Strategic Bond Investor, Third Edition: Strategic Tools to Unlock the Power of the Bond Market The Strategic Bond Investor, Third Edition: Strategic Tools to Unlock the Power of the Bond Market
2021
The End of the Everything Bubble The End of the Everything Bubble
2021
Expected Returns on Major Asset Classes Expected Returns on Major Asset Classes
2012
Asset Management Asset Management
2014
The Foreign Exchange Matrix The Foreign Exchange Matrix
2013
The Bond Book, Third Edition: Everything Investors Need to Know About Treasuries, Municipals, GNMAs, Corporates, Zeros, Bond Funds, Money Market Funds, and More The Bond Book, Third Edition: Everything Investors Need to Know About Treasuries, Municipals, GNMAs, Corporates, Zeros, Bond Funds, Money Market Funds, and More
2010

More Books by Vineer Bhansali

Tail Risk Hedging: Creating Robust Portfolios for Volatile Markets Tail Risk Hedging: Creating Robust Portfolios for Volatile Markets
2013
Bond Portfolio Investing and Risk Management Bond Portfolio Investing and Risk Management
2010
Fixed Income Finance: A Quantitative Approach Fixed Income Finance: A Quantitative Approach
2010

Customers Also Bought

Managing Material Risk Managing Material Risk
2022
Is There a Retirement Crisis? An Exploration of the Current Debate Is There a Retirement Crisis? An Exploration of the Current Debate
2020
Bursting the Bubble: Rationality in a Seemingly Irrational Market Bursting the Bubble: Rationality in a Seemingly Irrational Market
2021
University Endowments: A Primer University Endowments: A Primer
2019
Stock Buyback Motivations and Consequences: A Literature Review Stock Buyback Motivations and Consequences: A Literature Review
2022
Risk Tolerance and Circumstances Risk Tolerance and Circumstances
2018