In the battle against Covid-19, governments around the globe were on the cusp of becoming more indebted than at any
Posted: Sun May 29, 2022 4:31 pm
In the battle against Covid-19, governments around the globe
were on the cusp of becoming more indebted than
at any point in modern history,
surpassing even World War II. From Germany to Japan, Canada
to China, fiscal authorities spent vast sums protecting their
people and defending their economies from the colossal toll of the
pandemic. At the same time corporations, emboldened by
unprecedented government support for
markets, are selling bonds like never
before. The borrowing binge has come with a hefty price tag—$19.5
trillion in 2020 alone, according to Institute of International
Finance estimates. Still, compared to the alternative—a
deep and lasting depression—that
looked cheap. In a world where
rock-bottom interest rates have kept
debt costs manageable, it’s also
affordable. But if rates rise faster and higher than expected, the
end of the Covid-19 crisis could mark the beginning of a
reckoning.
Q1) Define Deep-discounted, High Yield Junk Bond,
Convertible, Redeemable,
and Eurobond?
Q2) What is the relationship between interest rates and
bond prices?
Q3) What is credit rating and how does it impact the
bond market?
Q4) Is the current state of competition on the market
affecting accuracy of credit
ratings?
were on the cusp of becoming more indebted than
at any point in modern history,
surpassing even World War II. From Germany to Japan, Canada
to China, fiscal authorities spent vast sums protecting their
people and defending their economies from the colossal toll of the
pandemic. At the same time corporations, emboldened by
unprecedented government support for
markets, are selling bonds like never
before. The borrowing binge has come with a hefty price tag—$19.5
trillion in 2020 alone, according to Institute of International
Finance estimates. Still, compared to the alternative—a
deep and lasting depression—that
looked cheap. In a world where
rock-bottom interest rates have kept
debt costs manageable, it’s also
affordable. But if rates rise faster and higher than expected, the
end of the Covid-19 crisis could mark the beginning of a
reckoning.
Q1) Define Deep-discounted, High Yield Junk Bond,
Convertible, Redeemable,
and Eurobond?
Q2) What is the relationship between interest rates and
bond prices?
Q3) What is credit rating and how does it impact the
bond market?
Q4) Is the current state of competition on the market
affecting accuracy of credit
ratings?