Saturday, December 19, 2009

Yield curve

The yield curve steepens. This increases the cost of borrowing for government, increasing the attraction of long-dated index-linked borrowing (see below). It should also help to reacapitalise banks. The steep yield curve is the most simple of the carry trades - borrow from the government at one rate and lend back to them at another. There is a liquidity risk, but...Even that can be hedged. / UK - Federal Reserve renews vow to keep rates low

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