Bond spreads have a profound influence in the forex market. This is in tandem with many of the correlations we see between currencies and other markets such as the stock markets and the commodity markets. In this article, we will show the correlation between forex and bond spreads. What are Bond Spreads? What are bond spreads? The bond spread is the difference in the yield of one bond and another bond. Specifically, it is used to describe the yield spread difference of the bond yields of two countries. In the forex market, the difference in the interest rate yields of two countries form the basis of the carry trade in forex. The carry trade is the practice of purchasing (i.e. taking a [...]
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Why invest in gold? To the frustration of money market investors, today’s low growth environment significantly dampens returns on equities. For this reason, many are turning to alternative asset classes in order to combat record-low interest rates and soaring rates of inflation. Amongst these alternative investments, gold has long been heralded as a star performer. Because gold behaves very differently to equities, it has a strong track record as an effective hedge against inflation. In fact, inflation often has a positive effect [...]Read More
What is Short Selling? Short selling in the financial markets means borrowing an asset such as a stock from a broker to sell them at a high price, and then buying them back when prices have fallen so as to return the asset to the broker, and benefiting from the price differentials. Short selling is used when there is an expectation that the price of an asset will fall within a space of time. Traders generally carry out short selling to make money from falling prices or they use it as a hedging strategy to protect themselves from [...]Read More