Bond vigilante and Corkscrew: Difference between pages

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imported>Doug Williamson
(Create page - source - Reuters - https://www.reuters.com/markets/europe/bond-vigilantes-mean-business-governments-better-beware-2022-10-17/)
 
imported>Doug Williamson
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''Risk management - central government borrowing - inflation risk - bonds.''
A structure for accounting and for the financial modelling of balances.


A bond vigilante is a holder of long dated central government debt that sells - or threatens to sell - their holdings as a response to increased inflation risk.
The closing balance is calculated from the opening balance, plus or minus the net inflow or outflow for the period.


If inflation were to be higher, then the redemption value of the long dated debt would be lower, in real (inflation adjusted) terms.
The closing balance figure in turn provides the opening balance for the next period.  


The longer dated the debt, the greater the effect on real terms values.


For example:


Selling bonds in this way results in their prices falling, and the cost of borrowing for the government to rise, expressed in rises in the yields on government debt.
Last year’s closing balance (20X2) on the balance sheet = This year’s opening balance (20X3)


+/-  This year’s flow (in or out in 20X3) = This year’s closing balance (20X3) on the balance sheet


:<span style="color:#4B0082">'''''Bond vigilantes mean business, governments better beware'''''</span>


:"The sight of Britain's new finance minister shredding up his leader's economic policies on Monday [17 October] illustrated something very clearly - bond market vigilantes are back, they are bold and governments had better pay attention.


:It took just three weeks for markets to force the UK, the world's sixth largest economy and issuer of one of its reserve currencies, into its screeching U-turn...
The movement of the developing balance follows a sawtooth or 'corkscrew' path.  


:'It is really not the right time to experiment with fiscal policy,' AXA chief economist Gilles Moec said about the UK's moves, assessing that Monday's U-turn may have appeased 'the bond vigilantes for now'.
Hence the name 'corkscrew' for this structure.


The term, bond vigilantes, refers to debt investors imposing fiscal discipline on profligate governments by forcing their borrowing costs higher."
:''Reuters - 17 October 2022.''




== See also ==
== See also ==
* [[Bond]]
* [[Accounting]]
* [[Fiscal policy]]
* [[Balance]]
* [[Gilts]]
* [[Daisy chain]]
* [[Hedging]]
* [[Financial modelling]]
* [[Inflation]]
* [[Inflow]]
* [[Inflation risk]]
* [[Outflow]]
* [[Real terms]]
* [[Reserve currency]]
* [[Risk management]]
* [[Yield]]
 
 
==External link==
*[https://www.reuters.com/markets/europe/bond-vigilantes-mean-business-governments-better-beware-2022-10-17/ Analysis: Bond vigilantes mean business, governments better beware]


[[Category:Accounting,_tax_and_regulation]]
[[Category:The_business_context]]
[[Category:The_business_context]]
[[Category:Identify_and_assess_risks]]
[[Category:Technology]]
[[Category:Manage_risks]]
[[Category:Risk_frameworks]]
[[Category:Risk_reporting]]
[[Category:Financial_products_and_markets]]

Latest revision as of 06:19, 28 December 2022

A structure for accounting and for the financial modelling of balances.

The closing balance is calculated from the opening balance, plus or minus the net inflow or outflow for the period.

The closing balance figure in turn provides the opening balance for the next period.


For example:

Last year’s closing balance (20X2) on the balance sheet = This year’s opening balance (20X3)

+/- This year’s flow (in or out in 20X3) = This year’s closing balance (20X3) on the balance sheet


The movement of the developing balance follows a sawtooth or 'corkscrew' path.

Hence the name 'corkscrew' for this structure.


See also

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