Just when the whole world coming for a rout, only US treasury yields shoot up to multi-months high. Investors might wondering why this happen. Some of our readers are posting these kind of question to us. We think this article might helps.
US Treasury = US Government Bond
Also, government bonds were usually referred to as risk-free bonds, because governments could easily devalue their currencies or raise taxes to redeem the bond at maturity.
The Story of US Treasury Yields...
Just like Base-Lending-Rate (BLR) for Malaysia, everything from mortgages to corporate loans in US depends on US treasury yields. Higher yields mean higher borrowing costs. To stimulate the US economy, Federal Reserve had came out with various Quantitative Easing (QE) actions to bring down the said yields, allowing borrowers access to cheap funding. How to bring down yields? Federal Reserve will buy back US treasuries, thus, flooding the market with money. The side effect was a weakening USD.
However, all things will change 360 degree, if Federal Reserve start to slow down or totally stop their so called QE3. This is what happening now, creating uncertainties to global markets.
No comments:
Post a Comment
Finance Malaysia Blog appreciates your comment. Cheers!