{"id":611,"date":"2016-08-09T12:55:16","date_gmt":"2016-08-09T11:55:16","guid":{"rendered":"https:\/\/www.forexmentorpro.com\/blog\/?p=611"},"modified":"2024-05-22T23:46:50","modified_gmt":"2024-05-22T22:46:50","slug":"bond-markets-forex","status":"publish","type":"post","link":"https:\/\/www.forexmentorpro.com\/blog\/bond-markets-forex\/","title":{"rendered":"Essential Guide to The Bond Market & Forex"},"content":{"rendered":"

Bonds 101: An Essential Guide to The Bond market<\/strong><\/h2>\n

This bond market blog will help you understand the bare essentials which are important in the global macro process. These basics are essential<\/em>\u00a0<\/em>to carry out an analysis for yourself and to lend conviction to your trading decisions.<\/p>\n

The words Bond market are\u00a0enough to make many traders head for the hills and trade technicals alone. It\u2019s easy to want to shut out the noise than can so often render the fundamentals difficult to grasp.<\/p>\n

Over at the Fotis trading Academy, we find that the global macro understanding gives us our edge; it is the first part of our three step process. Technical analysis is the final step when the ducks are lined up and we are ready to pull the trigger.<\/p>\n

Those of you who have experienced any of our webinars know\u00a0what we look for: information relating to growth, inflation and interest rates. In this summer period we will be taking a closer look at Central Banks and their role in deciding policy and rates. We will look at the way those three factors are considered in their process.<\/p>\n

There is another important strand which weaves its way through all the factors presenting to the market players \u2013 sentiment. How are the traders behaving? Are they taking risks or are they fearful? How is the relevant\u00a0data affecting their decision making process? Risk-on and risk-off are the two contrasting environments. To assess what we are looking at in terms of sentiment we have to understand bonds and, more particular, Government bonds. There are lots of types -junk, corporate, government – all with the same idea: get investor\u2019s money and pay them interest for the \u2018loan\u2019.<\/p>\n

Except it doesn\u2019t\u2019 work like that now. We are in the age of negative yields (yields meaning interest rates paid to the holder of the bond). Government bonds, as many of you know, are in many instances under water. More than 40% of government bonds have negative yields which, in simple terms, means you owe the government money (for lending it to them) when the bond matures at a specified time. This is causing grave concerns among economists but also a trend of bond buying that underscores a\u00a0search for safety rather than return. It\u2019s fearful participants are looking for places to invest in case there is a global recession. Or \u2013 worse \u2013 a crash as we saw in 2008.<\/p>\n

Here is the familiar German Yield on the 10 yr Bund, image courtesy of www.stockcharts.com<\/p>\n

\"Det_2016-07-26_1353\"<\/p>\n

Quite a shock to see it dip into negative territory and not very optimistic when it’s still 10 years to maturity!<\/span><\/p>\n

The second important fact is that yields (the rate) move inversely to the price of the bond. It is unnecessary to understand the mechanics, but here is an oversimplified explanation if you\u2019re interested. If you buy a bond which matures in 10 years, and the rate goes up, no one would want yours with a lower yield. So the price of the bond comes down to the level at which it would be attractive. If the rate goes down, your bond becomes much more attractive so it is in more demand and the price of it will rise. It is just a case of supply and demand.<\/span><\/p>\n

Here is the inverse relationship in chart form…the German 10yr bond itself;<\/span><\/p>\n

\"eurbund_2016-07-26_1356\"<\/p>\n

All major economies have their own bonds<\/span><\/h2>\n

In the UK they call them\u00a0Gilts (they used to have gold edges!)<\/span><\/p>\n

The US call them\u00a0treasuries;<\/span><\/p>\n

In Germany as in the EZ they are Bunds.<\/span><\/p>\n

In Switzerland even their\u00a0<\/i><\/span>50 yr note has seen negative territory<\/span><\/em>\u00a0<\/span>and that means a dim outlook for any growth. If you own that one,\u00a0the Government has your money for 50 years and – as of today \u2013 you wouldn\u2019t see a penny.<\/span><\/p>\n

That is why Bonds is a sensitive barometer of safety plays. It’s also why we will continue to discuss and take a look each week in the Monday\u00a0blog.<\/span><\/p>\n

If you have any questions which you want to ask please post below. No question is a silly question, just a learning curve!<\/span><\/p>\n

There are different maturity lengths such as 2yr, 5yr,10 yr, 25yr, 50yr. And then there is the spread<\/a>. That will be the subject of another blog because that comparative between the different time lengths in one country holds some powerful clues as to the business<\/a> cycle and if a recession is likely.<\/span><\/p>\n

Since it’s summer time, the next question is, shaken or stirred? \u00a0\ud83d\ude42<\/span><\/p>\n

Judith Waker<\/p>\n

If you would like to learn how to trade like a professional check out our 5* rated forex mentor program, RISK FREE; by clicking on the \u201cGet Started Today\u201d Button below<\/p>\n

\"\"<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Bonds 101: An Essential Guide to The Bond market This bond market blog will help you understand the bare essentials which are important in the global macro process. These basics are essential\u00a0to carry out an analysis for yourself and to lend conviction to your trading decisions. The words Bond market are\u00a0enough to make many traders […]<\/p>\n","protected":false},"author":35,"featured_media":553,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","rank_math_focus_keyword":"","rank_math_description":"Essential Guide to The Bond Market and Forex. Learn the key concepts, strategies, and insights to navigate the bond market and forex trading effectively.","rank_math_title":"","footnotes":""},"categories":[3],"tags":[41,13],"class_list":["post-611","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-forex-articles","tag-bond-markets-forex","tag-learn-forex"],"_links":{"self":[{"href":"https:\/\/www.forexmentorpro.com\/blog\/wp-json\/wp\/v2\/posts\/611","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.forexmentorpro.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.forexmentorpro.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.forexmentorpro.com\/blog\/wp-json\/wp\/v2\/users\/35"}],"replies":[{"embeddable":true,"href":"https:\/\/www.forexmentorpro.com\/blog\/wp-json\/wp\/v2\/comments?post=611"}],"version-history":[{"count":2,"href":"https:\/\/www.forexmentorpro.com\/blog\/wp-json\/wp\/v2\/posts\/611\/revisions"}],"predecessor-version":[{"id":219242,"href":"https:\/\/www.forexmentorpro.com\/blog\/wp-json\/wp\/v2\/posts\/611\/revisions\/219242"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.forexmentorpro.com\/blog\/wp-json\/wp\/v2\/media\/553"}],"wp:attachment":[{"href":"https:\/\/www.forexmentorpro.com\/blog\/wp-json\/wp\/v2\/media?parent=611"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.forexmentorpro.com\/blog\/wp-json\/wp\/v2\/categories?post=611"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.forexmentorpro.com\/blog\/wp-json\/wp\/v2\/tags?post=611"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}