econ423lec13

econ423lec13 - 7/8/2009 1 THE BOND MARKET THE BOND MARKET...

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Unformatted text preview: 7/8/2009 1 THE BOND MARKET THE BOND MARKET JULY 8 TH , 2009 Lauren Heller Econ 423, Financial Markets The Plan for Today b Homework Quiz #4 b Money Markets: Tying it All Together b How can we compare them on the basis of risk, return, and liquidity? b Introduction to Capital Markets b The Bond Market Recall from last time b There are variety of instruments traded in money markets which share similar characteristics: b Short-term (Maturities < 1 year) b Low Risk b Highly Liquid b Usually sold in large denominations b Given the wide range of money market securities offered, how can we differentiate between them? Comparing Money Market Securities b Interest Rates b Since almost all money market securities are low risk and short term, they are close substitutes. b As a result, interest rates on these investments tend to move together over time. Comparing Money Market Securities Notice that no real pattern is present among the rates. Investor preferences about instrument features tend to fluctuate. Comparing Money Market Securities b Interest Rates b Since almost all money market securities are low risk and short term, they are close substitutes. b As a result, interest rates on these investments tend to move together over time....
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econ423lec13 - 7/8/2009 1 THE BOND MARKET THE BOND MARKET...

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