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As I understand, a swap is an exchange in interest rates between one party which had a fixed borrowing cost with another with a variable rate borrowing cost (in this case referring to 10-year bonds- fixed/ LIBOR linked interest rate).
As mentioned in the TODAY article, interest rate manipulation by governments in recent years have seen interest rates being manipulated downwards (US FED (since Aug2007) from 5.25 to under 0.25%, ECB from 3.25% to 0.75% and ditto Japan, now at 0.1%)
So in the context of this report can anyone please explain to me how the outcome is "a real loss for investors." in the context of "10-year swap spread" being "negative" - i.e. is the 10 year swap spread being positive to be understood as being a 'good thing'?
Also, whom does the word "investors" here refer to: those lending $$$(bondholders) or those borrowing the $$$ (bond issuers)- low interest rates favor bond issuers- so hopefully, the problem is with the reporting, not my eyes or the readers consuming this mysterious piece of news.
That said, I do not disagree with the problems envisaged by the author consequent to G8 govts (if not others) manipulating unnaturally downwards- the interest rates, at the expense of unbridled monetary easing with the attendant consequence of future debt burden/ price inflation (if not hyperinflation)/ welfare services supply deflation; rather than the better option of more socially/ morally sound measures such as better targeted taxation and cost cutting measures to improve the morality within society and thus genuine progress rather than just a successful manipulation of specific numbers and other KPIs like joblessness, GDP, CPI etc which we all know are all highly manipulable statistic presentations that oft times betray the true spirit of progress within society.
YouTube: 'What is a swap? - MoneyWeek Investment Tutorials'
[PS: I might edit this qn if I discover more info]
As I understand, a swap is an exchange in interest rates between one party which had a fixed borrowing cost with another with a variable rate borrowing cost (in this case referring to 10-year bonds- fixed/ LIBOR linked interest rate).
As mentioned in the TODAY article, interest rate manipulation by governments in recent years have seen interest rates being manipulated downwards (US FED (since Aug2007) from 5.25 to under 0.25%, ECB from 3.25% to 0.75% and ditto Japan, now at 0.1%)
So in the context of this report can anyone please explain to me how the outcome is "a real loss for investors." in the context of "10-year swap spread" being "negative" - i.e. is the 10 year swap spread being positive to be understood as being a 'good thing'?
Also, whom does the word "investors" here refer to: those lending $$$(bondholders) or those borrowing the $$$ (bond issuers)- low interest rates favor bond issuers- so hopefully, the problem is with the reporting, not my eyes or the readers consuming this mysterious piece of news.
That said, I do not disagree with the problems envisaged by the author consequent to G8 govts (if not others) manipulating unnaturally downwards- the interest rates, at the expense of unbridled monetary easing with the attendant consequence of future debt burden/ price inflation (if not hyperinflation)/ welfare services supply deflation; rather than the better option of more socially/ morally sound measures such as better targeted taxation and cost cutting measures to improve the morality within society and thus genuine progress rather than just a successful manipulation of specific numbers and other KPIs like joblessness, GDP, CPI etc which we all know are all highly manipulable statistic presentations that oft times betray the true spirit of progress within society.
YouTube: 'What is a swap? - MoneyWeek Investment Tutorials'
[PS: I might edit this qn if I discover more info]
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At:
HWZ:
11Jan2013: '10year swap spread' means what?
A1:
11Jan2013: '10year swap spread' means what?
SGC:
11Jan2013: '10year swap spread' means what?
11Jan2013: '10year swap spread' means what?
11Jan2013: '10year swap spread' means what?
11Jan2013: '10year swap spread' means what?
11Jan2013: '10year swap spread' means what?
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