Euromarkets (Ch. 13)
... London, UK.
One million Eurodollars have thus been created by substituting a dollar account in a
London bank for the dollar account held in NY. Notice that no US $ left NY but
ownership of the US deposit has moved from a foreign corporation to a foreign bank.
The London bank would not like to leave ...
The Full Report from Bond Talk
... Would-be buyers will have to continue renting as banks are still not
lending money. The decision by Nersa to grant Eskom a tariff hike
of 31.3% will make it even difficult for home owners and many are
likely to lose their homes, said Venter.
The Reserve Bank has missed an opportunity to help stimula ...
Interest Rates - Beaconsfield High School Virtual Learning
... effectively for changes in their external environment? Justify your
answer with reference to Thornton's, Comet and/or any other
organisations that you know. (40 marks)
The external environment in which businesses operate can have a
significant effect on their success. To what extent do you think tha ...
Fixed Income Portfolio Management Interest rate sensitivity
... and the portfolio is said to be immunized against interest rate risk
– immunization can be done on a net worth basis (e.g. banks try to
mitigate effects of interest rates on their worth) or in terms of a
target date (e.g. pension funds, any institution with a fixed future
Crisis money market
... • The Eurodollar markets were increasingly
frozen as the crisis progressed, making it dicult
for European institutions to borrow dollars
directly (i.e. the right hand side of equation (2)
gradually became in a sense irrelevant). The
reduction in the availability of short-term
dollar funding intensif ...
SWISS MONETARY POLICY AND THE CRISIS
... 1. In August 2007, the SNB was among the first central banks to
inject additional liquidity to accommodate a large increase
in bank demand for liquidity.
2. Since the Swiss economy was performing well and in view of
the fact that inflation rose above 2% in 2008, triggering risks
for price stability ...
Why is Fed Considering Paying Banks Not To Lend to
... Attacks by populist politicians will only grow if the Federal Reserve pays banks $50 billion or
$100 billion per year that would, in effect, fatten bank profits in order to not make loans to Main
The federal funds rate is out because that would require the Fed to shrink its balance sheet of
Treasury Management Strategy
... part of the revolving facility and therefore we would not wish to repay the loan as we will be
unable to redraw it at a point in the future. When the fixed rate matures this will convert to a
variable rate loan based on 3 or 6 month LIBOR unless market conditions indicate that longer
LIBOR periods o ...
Low interest rates pressuring US bank margins
... The US banking industry in 2011 was a strongly profitable one: return on assets
rose across banks of all sizes and net income was close to pre-crisis levels. A
closer look, however, reveals this profitability was mainly a result of lower loan
loss provisions. Provisions declined year-over-year for t ...
Advanced Derivatives: swaps beyond plain vanilla Structured notes
... Diff swaps: (currency hedged basis swap)
Floating for floating swap
Floating rates are in different currencies
All swap payments in one currency
Example: swap 5 year gilt (£) yield for 5 year CMT T-note yield
swap payments in $
(5-year £ gilt yield) x Notional principal ($)
Negative Interest Rates Spread Worldwide
... That has been a bedrock assumption across centuries of financial history. But it is an assumption
that is increasingly being tossed aside by some of the world’s central banks and bond markets.
A decade ago, negative interest rates were a theoretical curiosity that economists would discuss
almost as ...
here - Reverse Market Insight
... While the LIBOR rate may often be slightly higher than a comparable
maturity Treasury rate, the better margins available for LIBOR-indexed
loans often make these loans a better deal for consumers.
Although LIBOR may diverge from Treasury rates from time to time, the
two indices have historically ...
Five (easy) ways to prepare for rising interest rates
... The yield on Canada's benchmark 10-year government bond, for instance, has plunged to less than
1.5 per cent from about 3.5 per cent in 2011. Over the same period, the five-year yield has tumbled
to less than 0.85 per cent from more than 2.5 per cent.
So does that mean investors can stop thinking ab ...
United Overseas Bank and Citigroup Announce the
... The final tranche was an unrated US$7m Preferred Share tranche priced at par. The
tranches were placed with a diversified investor base.
“Raffles Place Funding, Ltd signals the on-going transformation of the Singaporean
asset manager community from CDO investors into CDO managers, a maturation
Low interest rates and implications for financial stability
... Note: The table reports the projections for EU28 by the IMF reported in the World Economic Outlook for the last year in the projection horizon: 2015 for the October 2010 WEO, 2018
for the October 2013 WEO and 2012 for the April 2016 WEO. As for the European Commission, the table shows the projection ...
HOMEWORK 3 SOLUTION Chapter 8 1. Assume that your company
... The yield required by the market on long‐term bonds may change in response to the 50
basis point increase in short‐term rates. If long‐term interest rates rise, then by pledging to
sell the Eurobonds at par, CSFB will lose the difference between par and the new lower
Less Than Zero: The Brave New World of Negative Interest Rates
... Two years into the experiment, it’s time for a more balanced view, says
Wellesley College economist Daniel Sichel. While negative rates have hardly
proved to be a panacea for the slumping global economy, neither have they
wrought the sort of chaos and disaster that naysayers predicted. Far from
"Why Interest Rates Will Rise," Funds Society
... point in Fed policy. Although her comments were balanced, Janet Yellen’s speech indicated a
shift toward policy normalization, an end of the low volatility policy framework, and an
emphasis on data dependence. In short, if the economy expands, as most economists expect,
the Fed will raise interest r ...
... All the options are calculated based on net figures, recognizing that interest rate risk
can be minimized by matching the maturity profiles of the borrowing and investment
portfolios, so the interest rate risk of variable rate borrowing can be offset by holding
variable rate investments.
Options B a ...
Floating rate Term Deposits
... market of the whole economy. Retail investors borrow at floating rates, but invest at a fixed
rate, and are therefore exposed to high interest rate risk. Since retail investors cannot hedge
their interest rate risk, investing in floating-rate products appears to be the only alternative to
lower this ...
What should we make of the negative interest rates that
... Institutional investors that manage great quantities of funds
would be particularly interested in this kind of solution.
This could even extend to creating a parallel currency that
would be based on cash reserves held in enormous vaults.
In fact, there are no limits on innovation when there is
Intergrated Bank Corporation (IBC) is a medium
... The initial teaser and future spreads passed through to bond holders – less the servicing fee – are
set so that GNMA ARMs trade at par at issuance.
Specifically, the currently, the teaser spread on new 10-year GNMA ARMs is 75 basis point.2
Thus, given today’s one-year CMT rate of 3.12 percent (see T ...
... Since lending rates were fully liberalized in 2013, the complete
removal of the deposit rate ceiling is the only remaining key step
of interest rate liberalization.9 This ceiling is clearly binding, as
evidenced by the higher rate banks are paying on wealth
management products. This final move will ...
The Libor scandal was a series of fraudulent actions connected to the Libor (London Interbank Offered Rate) and also the resulting investigation and reaction. The Libor is an average interest rate calculated through submissions of interest rates by major banks in London. The scandal arose when it was discovered that banks were falsely inflating or deflating their rates so as to profit from trades, or to give the impression that they were more creditworthy than they were. Libor underpins approximately $350 trillion in derivatives. It is currently administered by NYSE Euronext, which took over running the Libor in January 2014.The banks are supposed to submit the actual interest rates they are paying, or would expect to pay, for borrowing from other banks. The Libor is supposed to be the total assessment of the health of the financial system because if the banks being polled feel confident about the state of things, they report a low number and if the member banks feel a low degree of confidence in the financial system, they report a higher interest rate number. In June 2012, multiple criminal settlements by Barclays Bank revealed significant fraud and collusion by member banks connected to the rate submissions, leading to the scandal.Because Libor is used in US derivatives markets, an attempt to manipulate Libor is an attempt to manipulate US derivatives markets, and thus a violation of American law. Since mortgages, student loans, financial derivatives, and other financial products often rely on Libor as a reference rate, the manipulation of submissions used to calculate those rates can have significant negative effects on consumers and financial markets worldwide.On 27 July 2012, the Financial Times published an article by a former trader which stated that Libor manipulation had been common since at least 1991. Further reports on this have since come from the BBC and Reuters. On 28 November 2012, the Finance Committee of the Bundestag held a hearing to learn more about the issue.The British Bankers' Association said on 25 September 2012 that it would transfer oversight of Libor to UK regulators, as predicted by bank analysts, proposed by Financial Services Authority managing director Martin Wheatley's independent review recommendations. Wheatley's review recommended that banks submitting rates to Libor must base them on actual inter-bank deposit market transactions and keep records of those transactions, that individual banks' LIBOR submissions be published after three months, and recommended criminal sanctions specifically for manipulation of benchmark interest rates. Financial institution customers may experience higher and more volatile borrowing and hedging costs after implementation of the recommended reforms. The UK government agreed to accept all of the Wheatley Review's recommendations and press for legislation implementing them.Significant reforms, in line with the Wheatley Review, came into effect in 2013 and a new administrator will take over in early 2014. The UK controls Libor through laws made in the UK Parliament. In particular, the Financial Services Act 2012 brings Libor under UK regulatory oversight and creates a criminal offence for knowingly or deliberately making false or misleading statements relating to benchmark-setting.As of August 2015, UBS trader Thomas Alexander William Hayes was the only person convicted in connection with the Libor scandal.