Investing in sovereign fixed income: traditional bonds or strips?
The difference between a strip bond and a traditional one is that a strip is a zero coupon bond, i.e. it does not pay coupons as these are included in the price. Therefore, strip they have a longer duration. For 30Y treasury bonds the duration or sensitivity to movements in interest rates is just under 20 years, while for strip bonds with the same maturity it is close to 30.
Is it good for the stock market to lower unemployment?
The immediate answer could be that a low unemployment rate is good for the stock market.
In the last few years, the unemployment rate has registered a marked decrease in the main geographical areas and has reached historical lows. One of the questions arising from these circumstances refers to the impact of these employment rates on equity performance.
How to invest in capital protected structured products?
Structured products are interesting investment solutions that help us build an investment vehicle that exactly matches our needs from combinations of different financial assets (fixed income, equities, derivatives, etc.) Its flexibility allows us to choose the term of the investment, the underlying assets, the currency, and of course, the level of risk that we want to assume, even delimiting the capital guarantee. Learn with the financial formation of BBVA in Switzerland, how to invest in funds protecting capital.
Impact of official rates on long-term treasury bonds
Investors usually believe that buying long-term US treasury bonds during a period of official rate hikes by the Federal Reserve is an unsuitable alternative. However, this supposition may not be completely true. Financial education with BBVA in Switzerland.
Solvency against risk of non-payment
U.S. treasury bonds act as safe-haven assets in circumstances such as deflationary crises, economic recession or shocks in financial markets. This is due to the fact that, at times such as these, investors in fixed income often reduce their investments in corporate bonds of low credit quality and, as such, high risk of non-payment. Instead, they prefer the maximum solvency of U.S. treasury bonds.
The investor’s chief problem
“The investor’s chief problem, and even his worst enemy, is likely to be himself”
This phrase of Benjamin Graham (considered to be the father of ‘value investing’, is without a doubt what has stuck with me for a long time and that I try to remember often.
How to invest in an economic debt environment
At present, most economies, both developed and also emerging market, are reporting excessive debt levels compared to the past. The amount of debt in the US economy, which in turn sets the pace of the world economy, stands at almost four time the wealth this country produces (measured by it gross domestic product).
what factors affect stock market prices?
The volatility on the stock markets produces some alarm among investors who are speculating about the causes of the falls. Many clients have called us and expressed typical concerns regarding these events. Hence, in the Markets Department at BBVA in Switzerland we feel it would be interesting to explain what factors affect stock market prices.
Treasury inflation-protected securities (TIPS) vs. traditional sovereign bonds
In this survey we shall try to identify the main differences between traditional sovereign bonds and Treasury inflation-protected securities (or TIPS), and to do so we shall focus on the US market, although the conclusions may be extrapolated to other key markets such as Germany, the UK, etc.
How emotions affect investment decisions?
Our emotions influence our decisions. It is vital therefore that we analyse how emotions impact investment decisions, and according to our investor advice and the favourable market indicators, we can reach success when investing.
Demographic growth, key factor for inflation
The authorities, the various institutions and investors are surprised and wonder what is causing inflation in developed countries has remained at all-time lows since the outbreak of the crisis in 2008.
Copper: world economy expansion
In the decision of whether to invest in gold or in copper, there are two very different underlying views of the future of the world economy.
Dots, points that plot our destiny
Despite Janet Yellen, the chair of the US Federal Reserve, is the most influential component in said organisation, we should never forget that she is not alone and there are other members whose vote, and often whose opinion, are equally important.
Wages and salaries, consumption’s indicators
Bearing in mind that consumer confidence in the USA has shot up over recent years (to even stand above the levels prior to the start of the 2008 crisis), it gives every indication that worker remuneration in the world’s biggest economy is going to start rising strongly over the coming quarters.
Inflation and oil, the thin black line
After the crisis that broke out in the USA in 2008, central banks acquired an even more prominent role than they already had to keep their battered economies afloat. With interest rates at all-time lows, the major economies had to resort to non-conventional measures and put debt-purchasing programmes under way, those known as QE (Quantitative Easing).
What are the keystones of gold prices?
Gold prices depend largely on the trend in real interest rates in the USA, i.e. nominal rates minus inflation. The graph compares gold (blue) with the real 5-year interest rate in the USA (orange, on an inverted scale). The lower the real interest rate, the higher the price of gold.
The power of diversification
On 6 June last, the Spanish entity Banco Popular was sold for one euro. The increasing withdrawals of deposits had created an unbridgeable liquidity gap. The European authorities gave the go ahead to the sale of Banco Popular, which marked the disappearance of the entity with the highest efficiency ratio in Spain.
The ISM, an indicator auguring an optimistic future
Despite the volatility and uncertainty reported worldwide in the first three months of the year, the major leading indicator, the US manufacturing index (ISM) is indicating that this country is going to undergo an improvement in its economy over the coming quarters.