BMC-module-3-4-yield-curve.txt

11:51 AM 8/26/2024

BMC Module 3.4: The Yield Curve

Bloomberg: Yield Curve -> GC
	x-axis is maturity, y-axis is yield
	Typically, the greater uncertainty/risk involved in longer-maturity debt makes the yield higher.
	This results in a positive-slope yield curve.

The difference between the yield on the longer- and shorter-maturity bonds is called the yield premium or 'term premium'.

ECFC: forecasts for economic indicator
FXFC: forecasts for exchange rates
BYFC: forecasts for bond yields


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Yield Curve and Corporate Bonds

	Corporate projects are medium- or long-term, and require the corresponding bonds
	Corporate bonds are higher yield [and higher risk] than govt bonds
		The difference is called the "spread"

	Yield Curve -> GC -> Kellogg's
		Easy way to visualize spread
		The aggregate of corporate bond spread is called the 'corporate spread'

	Basis points [bips] = hundredths of a %




Yield Curve and Consumers

	Government bond yields influence the affordability of homes and the overall level of activity in the housing market
	There are multiple second-order effects associated with the housing market
	

Yield Curve and Global Impact

	The worlds' economies tend to be stimulated or depressed in sync.
	The worlds' govt bond yields tend to move in sync as well.



Most bond yields and prices move with US govt bond yields/prices.