Market ECM Flashcards
Dax
19.400
YTD 15.88%
1J 27.5%
SAP
Zalando
SP500
5.800
YTD 23.2%
1J 33.6%
APPL
Interest rate
Central Bank
Fed 4.7% - 5% (large cut)
EZB 3.65%
EURIBOR
12M 2,766%
3M 3,215%
News in the market
Treasury yield curve
The yield curve is just a plot of the relation between the yield and the term of otherwise similar bonds.
The treasury yield curve plots treasury bond yields across their terms and is the most widely used yield curve as it sets a “risk-free” benchmark for other bonds
What does inverted yield curve tell you?
An inverted yield curve means that yields on longer maturities are lower than shorter maturities of otherwise comparable bonds, like treasuries. Normally, yield curves are upward sloping as issuers must pay a premium to
entice investors to keep their capital locked up for a longer-term.
Indicator of recession
The inversion happens as investors anticipate market interest rates to decline down the road
Upward Sloping: Long-Term Government Bond Yields > Short-Term Government Bonds Yields
Inverted: Long-Term Government Bond Yields < Short-Term Government Bonds Yields
Steepening: The interest rate differential between Short-Term and Long-Term bonds is increasing
Flattening: The interest rate differential between Short-Term and Long-Term bonds is decreasing
Price of oil
71 dollar
Price of Gold
73 euro
What is quantitative easing?
Quantitative easing (QE) is a form of monetary policy where the central bank will directly make purchases of longer-term securities from the open market to increase the money supply and total liquidity.
QE decreases interests rates, encourage more lending and money flow into equity since fx lower
Controversial since it floods market with money
Relationship between bond prices and interest rates?
There is an inverse relationship between bond price and interest rates.
if market up then interest from debt less attractive —> prices of bonds drop
