Posts Tagged ‘ Financial Planners in Ahmedabad ’

Inverted Yield Curve and its impact

Sunday, July 28th, 2013

Inverted Yield Curve and its impact

In the last article Understanding the Yield Curve we understood the basics of the yield curve; let’s focus more on the current situation wherein the G-sec yield curve in India has inverted significantly.

Yield Curve is a leading indicator of the economy & a good predictor of future economic activity.

Steep Yield Curve i.e. Positive spread between shorter and longer duration papers is generally followed by period of stronger growth and lower volatility, whereas inverted yield curve, where the yield on shorter duration papers is higher than longer ones, is followed by poor growth and recession.

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Understanding the Yield Curve

Thursday, July 25th, 2013

The recent upheavals in the Debt market have left the investors puzzled and frightened about the debt markets. Let us understand some of the basic concept of debt markets.

What is a Yield Curve?

Interest rates typically vary with maturity.

The graph or figure which depicts the yield on bonds of the same credit quality and liquidity against maturity is called a Yield Curve.

Ideally, yield curve should be plotted for bonds that are alike in all respects other than the maturity; but this is extremely difficult in practice. Bonds that have similar risks of default may be different in coupon rates, options etc.

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