It's the weekend!
Grab a cup of coffee, in this thread I will explain
1. What is a Yield Curve?
2. Why is it an important indicator of Recession?
3. Is an Economic Recession around the corner?
Lets dive right in!
A bond is a fixed income financial instrument which represents a loan made by an investor to a borrower
The investor typically receives payment in the form of interest and a lumpsum (principal) on maturity
The interest rate on a bond is known as coupon rate.
1. Zero Coupon : Pays both interest and principal at maturity
2. Sovereign Bonds : Issued by a Government or a Quasi Government Institution
3. Corporate Bonds : Issued by corporate like banks, established companies etc.
The higher the credit worthiness of the issuer, the lower the coupon rate
Credit Rating on a Bond is usually assigned by credit rating agencies like Moody's or Standard & Poor's (S&P)
Anything with a credit rating of BBB (Triple B) or lower is considered as 'junk bond' or a 'high yield bond' as they have high risk of default
Yield is simply the return an investor of a bond realizes over the course of the bond holding period
Bond Yield = Interest Payments / Bond Price
Since, coupon (interest) payments on a bond along with tenure of a bond is fixed
your yield on a bond simply depends on the change in its price
The logic and concept followed for calculation and estimating a Dividend Yield can be directly applied to a bond yield as well.
ITC as per its policy issues out 85% of its profits as Dividends to its Shareholders, this comes to around ~Rs 10/share
When ITC was trading
at 180/share, the Div. Yield was 5.5%
at 254/share, Div. Yield is 3.93%
If Bond Price come down, the Yield on the bond will increase
Suppose if you buy a 10 year Govt Bond that pays 5% interest yearly for Rs 1000
If instead of selling the bond when bond price rises to Rs 1100, you held on to your bond until its maturity date till end of 10 years
A Yield Curve is just a graphical representation of Yields of various bonds with similar credit rating but differing maturities
which depicts the Bond Yields on US Treasury Bonds for varying maturity dates ranging from 1 Month to 30 Years
Why is Yield Curve used to predict a Recession?
a. Upwards Sloping (Most of the Time)
b. Flat (Rare)
c. Inverted Yield Curve (Very Rare)
Yields on longer term bonds should be much higher compared to Yields on shorter term bonds
as
with longer term bonds you are taking more risk and hence need more interest as return
implying that near term risk in the economy is higher compared to long term
Bond Investors start dumping their short term bonds in favour for longer duration bonds
Demand for Short Term Bonds decreases, causing Bond Prices to collapse and Yields to Increase
While
Demand for Longer Term Bonds Increases, causing Bond Prices to rise and Yields to Decrease
Thus, creating the inverted Yield Curve.
Here are some of their publications on this subject
https://t.co/exRUKrkeYi
https://t.co/7dvY2PQOwE
https://t.co/iqxbeaqJg4
It even inverted right before the pandemic!
Most recently the US Treasury 2 and 10 yr Yield Curve Inverted on 29th March 2022
imply the onset of a recession anytime between end of 2022 to 2024.
Without Recessions, we wouldn't have the opportunity to reset and economy would overheat and turn into a bubble which when popped could bring depression.
1. Slowing Economic Growth
2. High Unemployment Rate
3. High to Medium Fed Interest Rates
The inflation today is purely a result of supply side shortages cause by the onset of the pandemic
I don't know and I am not sure if anybody does.
I hope you've found this thread helpful. Follow me @itsTarH for more.
Please Like/Retweet the first tweet below if you can: https://t.co/2zDVPC7lus
It's the weekend!
— Tar \u26a1 (@itsTarH) April 2, 2022
Grab a cup of coffee, in this thread I will explain
1. What is a Yield Curve?
2. Why is it an important indicator of Recession?
3. Is an Economic Recession around the corner?
Lets dive right in! pic.twitter.com/7qrYbT6Scj
All my previous work, can be found here
https://t.co/LV5EyiqlCw
All my Threads so far \U0001f9f5 \U0001f447\U0001f3fc
— Tar \u26a1 (@itsTarH) June 5, 2021
https://t.co/3OwTRkY8BZ
Here is a 5 hour long webinar on Green and Renewable Energy ☀️
Lots of India, Chinese and US companies covered along with Global Demand and Supply scenario
https://t.co/rkiK2iHlS0
More from Tar ⚡
Most of the indices are entering oversold territories
Take small cap index for example
Whenever Monthly RSI is below or around 40, the index bottoms out
We are getting there.
If I had 50% cash, I would have deployed some in beaten down stocks where earnings growth is intact. https://t.co/t5WwgH1V5o
Take small cap index for example
Whenever Monthly RSI is below or around 40, the index bottoms out
We are getting there.
If I had 50% cash, I would have deployed some in beaten down stocks where earnings growth is intact. https://t.co/t5WwgH1V5o
I have more than 50% cash but still worried if this is a good time. Will invest 20% by EoY
— Tamil Metaverse (@TamilMetaverse) June 21, 2022
More from Genericlearnings
China Index has corrected ~40% since its peak
Lot of regulatory crackdown in China. Top rated companies are available for huge discounts. $BABA for example now has a market cap of less than 600 Billion and is bigger than Amazon in every regard.
I have been aggressively investing more in Chinese equities than Indian ones.
https://t.co/W1RWdKU3sy
Lot of regulatory crackdown in China. Top rated companies are available for huge discounts. $BABA for example now has a market cap of less than 600 Billion and is bigger than Amazon in every regard.
I have been aggressively investing more in Chinese equities than Indian ones.
https://t.co/W1RWdKU3sy
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Great article from @AsheSchow. I lived thru the 'Satanic Panic' of the 1980's/early 1990's asking myself "Has eveyrbody lost their GODDAMN MINDS?!"
The 3 big things that made the 1980's/early 1990's surreal for me.
1) Satanic Panic - satanism in the day cares ahhhh!
2) "Repressed memory" syndrome
3) Facilitated Communication [FC]
All 3 led to massive abuse.
"Therapists" -and I use the term to describe these quacks loosely - would hypnotize people & convince they they were 'reliving' past memories of Mom & Dad killing babies in Satanic rituals in the basement while they were growing up.
Other 'therapists' would badger kids until they invented stories about watching alligators eat babies dropped into a lake from a hot air balloon. Kids would deny anything happened for hours until the therapist 'broke through' and 'found' the 'truth'.
FC was a movement that started with the claim severely handicapped individuals were able to 'type' legible sentences & communicate if a 'helper' guided their hands over a keyboard.
For three years I have wanted to write an article on moral panics. I have collected anecdotes and similarities between today\u2019s moral panic and those of the past - particularly the Satanic Panic of the 80s.
— Ashe Schow (@AsheSchow) September 29, 2018
This is my finished product: https://t.co/otcM1uuUDk
The 3 big things that made the 1980's/early 1990's surreal for me.
1) Satanic Panic - satanism in the day cares ahhhh!
2) "Repressed memory" syndrome
3) Facilitated Communication [FC]
All 3 led to massive abuse.
"Therapists" -and I use the term to describe these quacks loosely - would hypnotize people & convince they they were 'reliving' past memories of Mom & Dad killing babies in Satanic rituals in the basement while they were growing up.
Other 'therapists' would badger kids until they invented stories about watching alligators eat babies dropped into a lake from a hot air balloon. Kids would deny anything happened for hours until the therapist 'broke through' and 'found' the 'truth'.
FC was a movement that started with the claim severely handicapped individuals were able to 'type' legible sentences & communicate if a 'helper' guided their hands over a keyboard.
So friends here is the thread on the recommended pathway for new entrants in the stock market.
Here I will share what I believe are essentials for anybody who is interested in stock markets and the resources to learn them, its from my experience and by no means exhaustive..
First the very basic : The Dow theory, Everybody must have basic understanding of it and must learn to observe High Highs, Higher Lows, Lower Highs and Lowers lows on charts and their
Even those who are more inclined towards fundamental side can also benefit from Dow theory, as it can hint start & end of Bull/Bear runs thereby indication entry and exits.
Next basic is Wyckoff's Theory. It tells how accumulation and distribution happens with regularity and how the market actually
Dow theory is old but
Here I will share what I believe are essentials for anybody who is interested in stock markets and the resources to learn them, its from my experience and by no means exhaustive..
First the very basic : The Dow theory, Everybody must have basic understanding of it and must learn to observe High Highs, Higher Lows, Lower Highs and Lowers lows on charts and their
Even those who are more inclined towards fundamental side can also benefit from Dow theory, as it can hint start & end of Bull/Bear runs thereby indication entry and exits.
Next basic is Wyckoff's Theory. It tells how accumulation and distribution happens with regularity and how the market actually
Dow theory is old but
Old is Gold....
— Professor (@DillikiBiili) January 23, 2020
this Bharti Airtel chart is a true copy of the Wyckoff Pattern propounded in 1931....... pic.twitter.com/tQ1PNebq7d
