Explain how they allow you to interpret the statement

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Reference no: EM133203058 , Length: 1000

Assignment: Capital Markets

Case Study: 25741 Capital Markets

Read the article by Financial Times columnist Joe Rennison (from 2 April 2022) about corporate bond markets in the current economic environment, and provide answers to the following questions:

I. Consider the statement "Stock pickers are optimists and bond investors are pessimists, making the bond market a better predictor of future distress."

1. Describe and compare the relevant characteristics of stocks and bonds.

2. Explain how they allow you to interpret the statement.

II. Consider the statement "The US yield curve inverted this week, with interest rates on long-dated bonds falling below shorter-dated debt."

1. What is a yield curve and how is it constructed?

2. Describe a so-called normal yield and compare it with an inverted yield curve.

3. Plot a graph of the current U.S. government bond yield curve. Describe the data you used to plot the yield curve and explain where you got it from. Is the yield curve normal or inverted?

4. Explain why an inverted yield curve is an indicator of recession.

III. Consider the statement "Yet, even here stress is unlikely to show up early given the vast majority of syndicated loans are held by structured investment vehicles called collateralised loan obligations, which lock up investors' money and are less pressured to sell loans."

1. Describe syndicated loans and explain why firms use syndicated loans to finance their operations and investments. What are the advantages and disadvantages of syndicated loans, compared to corporate bonds?

2. Describe collateralised loan obligations. What are the advantages and disadvantages of these instruments?

3. Explain why collateralised loan obligations are less pressured to sell loans.

Attachment:- Corporate-Bond-Markets-are-Shrugging-off-the-Global-Worries.rar

Reference no: EM133203058

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