bond yields

UK Bond Yields Explained

UK Bond Yields Explained

UK bond yields are the rate of interest received by those holding Government bonds. Governments sell bonds (via the Debt Management Office DMO) to fund their budget deficits. Bonds are a way for the government to borrow – a bit like the government taking out a loan. Government bonds are frequently traded on bond markets. Therefore, their market price may be quite different to the original price set by the government. Example. A government may sell a 10 year, £1,000 bond at 5% interest. This means every year year the government will…

Why Can Japanese Government borrow at Low Interest Rates?

Why Can Japanese Government borrow at Low Interest Rates?

Readers Question: After the insightful post on ‘Italian Economic Decline’, I was particularly captured by the % debt to GDP line graph of the different developed countries. The one thing that really caught my eye was Japan’s huge % debt to GDP and yet their government bond yields are consistently declining. Aren’t the markets worried that Japan may default on their debt someday or is the fact that they have a lender of last resort (no fear of liquidity problems) unlike Italy and their 0% interest rates shielding…

The Economic Cost of High Bond Yields

The Economic Cost of High Bond Yields

Readers Question I’ve recently been looking up on the Eurozone financial crisis for random reasons and i don’t understand the statement in an FT article about what we must acknowledge in order to overcome the Eurozone problems. The statement goes ‘no country can be expected to generate huge primary surpluses for long periods for the benefit of foreign creditors’. Please can you help?! Firstly, it is not an easy article – there is a lot of jargon! To quote: “A fundamental shift of tack is required, towards an…