But for every market mispricing there is a profit opportunity if long term interest rates are, indeed, too low and long term bond prices too high, investors will short long term US bonds, park the money elsewhere, wait for bond prices to return to fundamentals, and then cover their short positions. By doing so, they will push prices close to fundamentals today.

In response, central banks should purchase government bonds for cash in as large a quantity as needed to push their prices up as high as possible. Expensive government bonds will shift demand to mortgage or corporate bonds, pushing up their prices.

Sierra Leone would issue iron ore bonds and Mongolia would issue copper bonds. Investors would be able to buy Guatemala s coffee bonds, Côte d Ivoire s cocoa bonds, Liberia s rubber bonds, Mali s cotton bonds, and Ghana s gold bonds.

Jamaica, for example, would issue aluminum bonds Nigeria would issue oil bonds Sierra Leone would issue iron ore bonds and Mongolia would issue copper bonds. Investors would be able to buy Guatemala s coffee bonds, Côte d Ivoire s cocoa bonds, Liberia s rubber bonds, Mali s cotton bonds, and Ghana s gold bonds.

NEW HAVEN The prices of long term government bonds have been running very high in recent years (that is, their yields have been very low). In the United States, the 30 year Treasury bond yield reached a record low (since the Federal Reserve series began in 1972) of 2.25 on January 30.

Investors use credit ratings as a factor in pricing loans on bonds.

CAMBRIDGE Six months ago, I wrote that long term interest rates in the United States would rise, causing bond prices to fall by so much that an investor who owned ten year Treasury bonds would lose more from the decline in the value of the bond than he would gain from the difference between the bonds interest rate and the interest rates on short term money funds or bank deposits.

The bonds can be sold to a worldwide market by insurance companies that incur major risks by writing policies. If the insurance companies can get a good enough price for such bonds, they can eliminate their exposure to the risk of a major disaster, thereby allowing them to issue policies to homeowners at a lower cost.

1 women apos s consumption portfolio for 129,076 bonds, consolidated to March 1995

This reaching for yield has driven up the prices of all long term bonds to unsustainable levels, narrowed credit spreads on corporate bonds and emerging market debt, raised the relative prices of commercial real estate, and pushed up the stock market s price earnings ratio to more than 25 higher than its historic average.

In 1997, Argentina, Brazil, Ecuador, Panama and Venezuela retired 10.4 billion of collateralized Brady bonds through swaps against uncollateralized long term bonds, effected at a discount based on secondary market prices.

One could emulate J.P. Morgan, whose standard response to questions about stock prices, bond prices, and interest rates was to say simply, The market will fluctuate.

Here is how the arithmetic works for an investor who rolls over ten year bonds for the next five years, thus earning 2 more each year than he would by investing in Treasury bills or bank deposits. Assume that the interest rate on ten year bonds remains unchanged for the next five years and then rises from 2 to 5 .

Pushing up asset prices and pushing down the euro s exchange rate will require the ECB to buy bonds on the secondary market not the crisis countries bonds per se, but those of all eurozone members. In other words, it will require quantitative easing.

There is virtually no history of the price behavior of longevity bonds, so discovering their buyers and sellers, and the prices that clear the market, will take some time. But longevity bonds, while only experimental today, will eventually become vitally important to the world economy.

Like the World Bank, United Nations budget assessment payments are obligations of Member States, and accordingly United Nations obligations (i.e., the bond issue) would probably be eligible to be defined as quasi sovereign.

If there is 120 of collateral guaranteeing a 100 bond, the bond is safer, no doubt. How much safer, however, depends upon the returns on the pool of bonds that compose the CDO.

Securities prices are extraordinarily high, considering the backdrop of flaccid economic growth. Bond prices have soared on the back of quantitative easing by the Bank of Japan, the Federal Reserve, and the European Central Bank.

Bond holders are to receive 456 million in bonds due in 2011 (with the same coupon of 9.5 per cent) and 574 million in bonds due in 2018 (with the same coupon of 9.04 per cent).

Bond

Doubts about whether governments would be able to service their debts caused borrowing costs to soar and bond prices to plummet. But, critically, these debt crises undermined confidence in Europe s banks, which held many of the bonds in question.

That is likely to be a money losing strategy unless an investor is sagacious or lucky enough to sell the bond before interest rates rise. If not, the loss in the price of the bond would more than wipe out the extra interest that he earned, even if rates remain unchanged for five years.

It may therefore be tempting to invest in inflation indexed bonds, which adjust both principal and interest payments to offset the effects of changes in price growth. But the protection against inflation does not prevent a loss of value if real interest rates rise, depressing the value of the bonds.

The authorities will issue 35.2 billion in new securities, comprising 15 billion in par bonds, 11.9 billion in discount bonds and 8.3 billion in quasi par bonds.

The broader use of gross domestic product (GDP) and commodity price linked bonds in international markets would serve the same purpose.

Bonds? Real estate?

That warning has already proved to be correct. The interest rate on ten year Treasury bonds has risen almost a full percentage point since February, to 2.72 , implying a loss of nearly 10 in the price of the bond.

Moreover, a consortium might not have access to the financial market for the purpose of raising funds, where only corporations are authorized by the law to issue negotiable instruments and securities such as stocks, bonds and debentures.

Even after central banks have pushed government bond prices as high as they can go, they should keep buying government bonds for cash, in the hope that people whose pockets are full of cash will spend more of it, and that this will directly pull people out of joblessness and into employment.

CDOs are a form of financial alchemy special purpose vehicles that buy the financial equivalent of lead (low rated mortgaged backed securities) and finance themselves mostly with the financial equivalent of gold (highly sought after AAA bonds). This transformation is based on one sound principle and two shaky ones.

And we came up with this idea of issuing bonds, press freedom bonds.

The decline in government bond prices has exposed the banks undercapitalization, while the prospect that governments will have to finance banks recapitalization has driven up risk premiums on government bonds. Facing the prospect of having to raise additional capital at a time when their shares are selling at a fraction of book value, banks have a powerful incentive to reduce their balance sheets by withdrawing credit lines and shrinking their loan portfolios.

The Battle of the Bonds

Debt service coverage and bond interest

So it is very likely that when the global economy has returned to a sort of normality and safe haven demand has declined, the prices of US government securities will fall and their yields will rise. As a result, China s dollar denominated foreign exchange reserves, which account for the largest share of all the foreign holdings of US government securities, will suffer interest rate losses.

Until there is a market for such bonds, we cannot know what the price will be. But we can expect that the market for long term GDP linked bonds from countries like Argentina, where the future of the economy is uncertain, would be volatile, as investors adjust their expectations of future GDP growth up and down in response to new information.

The Fund apos s bond portfolio was helped by its overweighting in United States and United Kingdom bonds and an underweight position in yen bonds.

Bond offering

It is true that extraordinarily low long term bond yields put us outside the range of historical experience. But so would a scenario in which a sudden bond market crash drags down prices of stocks and housing.

All of this is, of course, good news for those who own assets like long term bonds, stocks, and real estate. Indeed, elevating long term asset prices was precisely the point of lowering interest rates making bondholders and especially real estate owners richer, after all, provides a fillip to spending.

South Africa was the only country in sub Saharan Africa to issue on international bond or equity markets in 1997.

Debt buy back and Brady bonds11

Annual rate of security

The housing bonds system

I don't know.