Financial markets often fixate on the shape of the yield curve for government debt. Most of the time, this curve is ‘normal’ – that is to say, continually rising. This is also rational. The market prices longer-dated bonds more expensively than short-term notes because investors demand greater compensation for waiting longer for the bonds to mature. The longer an investor must wait for this to happen, the greater the potential threats from inflation, interest rate increases or default.
To continue reading, subscribe today
and enjoy unlimited access to the following:
- Tips of the Week
- Funds coverage
- Weekly features on big investment themes
- Trading ideas
- Comprehensive companies coverage
- Economic analysis
Comment
Emerging markets trading close to book value
Prospects for emerging market performance have diminished, although the transition to broad-based economies and a vastly improved income profile holds promise over the long run
Mark Robinson