NIR across Japan, Europe and Switzerland
1) Bonds and IR -
Government bonds are fixed interest securities. This means that a bond pays a fixed annual interest –
this is known as the coupon. The coupon (paid in £s, $s, Euros etc.) is fixed but the yield on a bond will
vary.
The yield is effectively the interest rate on a bond and the yield will vary inversely with the market price
of a bond. When bond prices are rising, the yield will fall and when bond prices are falling, the yield will
rise.
https://www.tutor2u.net/economics/reference/financial-economics-bond-prices-and-interest-rates
Fundamentally, market interest rates and bond prices move in opposite directions. A rise in bond prices
is caused by a decrease in interest rates.
Most bonds pay a fixed interest rate that becomes more attractive if interest rates fall, driving up
demand and the price of the bond.
https://www.investopedia.com/ask/answers/why-interest-rates-have-inverse-relationship-bond-
prices/
Conversely, if interest rates rise, investors will no longer prefer the lower fixed interest rate paid by a
bond, resulting in a decline in its price.
https://www.thebalance.com/why-do-bond-prices-go-down-when-interest-rates-rise-2388565
2) Central Banks and NIR Japan -
Introduction - Neutral.
Yen increased in value. This would've hurt their export-led economy from growing and so adopted a
negative rate in Early 2016. These are said to help weaken a country’s currency rate by making it a less
attractive investment as domestic borrowing becomes easier and money is less scarce than that of other
currencies. A weaker currency gives a country’s export a competitive advantage and boosts inflation by
pushing up import costs.
https://www.japantimes.co.jp/news/2019/08/14/business/negative-rate-policy-work/#:~:text=The
%20Bank%20of%20Japan%20adopted,institutions%20park%20with%20the%20BOJ.
Negative - 2016
Six months later, the Japanese economy showed no growth, and it's bond market was a mess. Conditions
have deteriorated so far that the Bank of Tokyo-Mitsubishi UFJ Ltd., Japan's largest private bank,
announced in June 2016 that it wanted to leave the Japanese bond markets because BOJ interventions
had made them unstable.
There are two reasons why central banks impose artificially low-interest rates. The first reason is to
encourage borrowing, spending, and investment. The second reason is it makes it easier for national
1) Bonds and IR -
Government bonds are fixed interest securities. This means that a bond pays a fixed annual interest –
this is known as the coupon. The coupon (paid in £s, $s, Euros etc.) is fixed but the yield on a bond will
vary.
The yield is effectively the interest rate on a bond and the yield will vary inversely with the market price
of a bond. When bond prices are rising, the yield will fall and when bond prices are falling, the yield will
rise.
https://www.tutor2u.net/economics/reference/financial-economics-bond-prices-and-interest-rates
Fundamentally, market interest rates and bond prices move in opposite directions. A rise in bond prices
is caused by a decrease in interest rates.
Most bonds pay a fixed interest rate that becomes more attractive if interest rates fall, driving up
demand and the price of the bond.
https://www.investopedia.com/ask/answers/why-interest-rates-have-inverse-relationship-bond-
prices/
Conversely, if interest rates rise, investors will no longer prefer the lower fixed interest rate paid by a
bond, resulting in a decline in its price.
https://www.thebalance.com/why-do-bond-prices-go-down-when-interest-rates-rise-2388565
2) Central Banks and NIR Japan -
Introduction - Neutral.
Yen increased in value. This would've hurt their export-led economy from growing and so adopted a
negative rate in Early 2016. These are said to help weaken a country’s currency rate by making it a less
attractive investment as domestic borrowing becomes easier and money is less scarce than that of other
currencies. A weaker currency gives a country’s export a competitive advantage and boosts inflation by
pushing up import costs.
https://www.japantimes.co.jp/news/2019/08/14/business/negative-rate-policy-work/#:~:text=The
%20Bank%20of%20Japan%20adopted,institutions%20park%20with%20the%20BOJ.
Negative - 2016
Six months later, the Japanese economy showed no growth, and it's bond market was a mess. Conditions
have deteriorated so far that the Bank of Tokyo-Mitsubishi UFJ Ltd., Japan's largest private bank,
announced in June 2016 that it wanted to leave the Japanese bond markets because BOJ interventions
had made them unstable.
There are two reasons why central banks impose artificially low-interest rates. The first reason is to
encourage borrowing, spending, and investment. The second reason is it makes it easier for national
