Financial management

Financial management

The article discusses the factors that drove the bond market in the year 2016. According to the author, 2016 was characterized by the search for safe higher returns. The world has experienced low yields for a long time due to either anti-deflationary policies pursued by G7 nations and reluctant US Fed suffering from a Quantitative easing hangover. August was the peak of the global bond market when the total negative yielding debt rose to $13.4trillion. 

A bond crash that stood at $11trillion was experienced amidst the wave of US elections. Bonds are often used by investors as important diversifiers. However, investors have increasingly tactically traded in and out of the bond market. In the past, investors avoided frequent trade activities in the bond market. Evidently, volatility in the bond market has been influenced by numerous factors including investors’ confidence, security posture, and risks perceived in the short term. Throughout the year, investors have increasingly move from less safe low yield havens and seek positive returns as soon as it seems less threatened by geopolitical risk (Trade, 2017).

The article relates to the topic of bond valuation. The volatility of bond prices can be caused by a range of factors including speculations by investors.  In this case, expected change in political power brought about heightened uncertainty. The bond market sell-off in 2016 indicate that investors were continuing to digest unknowns, which included projections that the country’s economic growth in the short-term under new president’s agenda. In addition, there are many factors that impact the prospects for growth beyond policy proposals. Another factor that contributed to the trend was the fears of a Chinese weakening currency and economic slowdown.

Reference

Trade M. (2017) Fractals show how 2016 has sown the markets' seeds for 2017. Business Insider. 

Sherry Roberts is the author of this paper. A senior editor at MeldaResearch.Com in online nursing papers if you need a similar paper you can place your order from medical essay writing service online.