Tightening

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1. Monetary policy - money supply.

Measures designed to reduce the money supply.

Usually with the intention of reducing excessive inflation.


Ample tools to tighten
"At present, if we overdo the stimulus somewhat and then find the economy recovers strongly, we have ample tools and time to tighten policy again before persistent excess demand and inflation become a problem."
Michael Saunders, External Member of the Bank of England's Monetary Policy Committee (MPC), May 2020.


2. Bonds - issuance - yields - spreads.

In relation to a bond yield, especially at issuance, tightening means a reduction in the yield.

This makes the bond a lower-cost source of financing for the issuer.

The reduction in yield is known as a tightening, because the spread over the yield on the comparable risk-free benchmark security is reduced.


Social bond pricing tightened by 0.45%
"After launch, the order book underwent rapid growth to £3.7bn – oversubscribed by more than 10 times – an exceptional response given market conditions at the time.
Pricing tightened by 0.45% between launch and final pricing.
The transaction is believed to be the first social bond focused solely on education."
ACT Deals of the Year Awards 2020 - Pearson.


3. Markets - spreads - bid-offer.

In two-way market pricing, the spread is the difference between the market maker's buying and selling prices (also known as the bid and offer, or bid and ask, prices).

Tightening spreads describes a reduction in the difference between the buying and selling prices.

This, in turn, generally indicates a liquid market, with strong price competition between market participants.


See also

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