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Governments of some countries issued the investment bond that was informally called gilt-edged securities, and in the US they are called treasuries. It is mostly issued by companies to spend in takeovers or on new projects. Professionals’ buying in investment bonds in 2011, led to the outstanding worth of over $100 trillion, which included 40 percent of government bonds. It was the time when its value was double the value of global shares. In the last few years, the eurozone crisis and the factors like rise in the borrowing costs of the Italian securities affected the sustainability of such investments.
Some experts believe the markets are undergoing a bubble where the increase in interest rates led to a decline in price – resulting in heavy losses to the bondholders. Eurozone gilts were down on October 22, 2019, before the finalization of Brexit where the prime minister of the country Boris Johnson may have to face two votes in the parliament where lawmakers will first vote for withdrawal agreement bill and then vote for approval of legislation. The possibility of Brexit extension continues to dominate the minds of market participants in the last weeks of October who are waiting for their leaders to make an agreement on the delay.
Voters are unsure of the majority but this has affected market activities where the 10-year government security yield was down by 1 basis point across the eurozone. When Brexit was first introduced, the 10-year treasuries were sold off and German 10-year yield grew 19bps since October 10.
Economic factors and its impact on the global investment bonds
American and European stocks were up as the treasuries sold off and the pound gained over the hopes of positivity in the post Brexit phase. One of the best earnings was given by Johnson and Johnson – of the healthcare sector, and the next best performers of the market were the technology stocks. Sterling was up by 1.3 percent against euro to €1.1572, one of the highest since May, indicating the selloff.
The crucial bloc summit is expected to start on Thursday and the recent trades in the market are influenced by such factors.
The trade disagreement between the US and China is expected to be resolved, while, the US treasury secretary said the new round of tariffs will be imposed by December 15 if Beijing failed to get a deal with the US president. The new tariffs will be imposed on goods worth $156bn. Both sides are expecting to see progress towards the resolution of conflicts.
Investment in these offers a method to lend money to companies or governments where the bondholder gets regular income in the form of interest for a fixed duration after which loan taken by the bond giver is repaid. The method provides a way to earn a steady income and such investments are mostly considered to be low-risk as there is no such chance of the government becoming bankrupt.
Sometimes, the government makes such offers to raise money but investment bonds of different countries may deliver different results. One cannot assume all of Eurozone to deliver the same and one can see this from the crisis of Greek markets and economic system.
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