Posts Tagged 'guide'

What are bonds?

There has been a lot in the news recently about “bonds” and “bond yields”.

The following is an article from the Sunday Business Post that explains what these are.

What is a bond?

A bond is a unit of debt. The bonds we’re all talking about these days are sovereign bonds, or units of government debt. But companies sell them too.

It’s just a contract by which an investor agrees to loan money to a company or government in exchange for a predetermined interest rate and generally for a predetermined period of time (two years, five years, ten years).

Why is it bad when bonds rise?

When we say a bond has risen, we mean the yield – or interest rate – on that bond has risen. Effectively yields and prices move in the opposite direction. A rising bond yield is a falling bond price.

As yields rise, it indicates investors won’t buy that country’s debt unless they get a better return. The higher the level of risk they perceive to their investment , the higher the interest rate which investors demand.

Right now investors fear that if they lend to Italy they may eventually not get all their money back – so they are demanding a higher interest rate to compensate for this perceived risk.

Right. And seven per cent is a high yield is it?

Yes it’s very high, particularly when a German bond is yielding two per cent, which means investors want a five per cent premium from Italy (this is an enormous gap in sovereign debt terms).When yields in Ireland and Portugal hit that level, it was time for a bailout.

OK, so why doesn’t Italy just stop selling bonds for a while until it all blows over?

It might have to, but then it has to worry about how to pay its bills. It needs to repay some maturing bonds later this year and has to raise a hefty €300 billion in 2012.The EU/IMF could offer funds to Italy – but they probably do not have enough in the kitty to bail Italy out for a period of years, as they have done with Ireland, Greece and Portugal.

The full article is available here.

Back in business!

Businessmansgcbusiness.com is back in business again.

First post of the new school year. Some of you may be new to the blog and our twitter page.

So what do you need to know?

1. The blog: New content will be posted each week e.g., business and economics news, sample answers for exam questions, worksheets, mind maps etc. Take a look at some of the posts from 2008-2009.

2. Our twitter page: As twitter is now available on the school’s broadband network, you should create your own twitter account and follow sgcbusiness on twitter. The homework you have each day will be posted to the twitter page. You will also see a tweet for any new posts on the blog.

3. Your Google Apps account: You should now have your own Google Apps account.  All handouts given in class and worksheets have been shared and you can find these in the Documents section of your account. Any dates for projects and exams are added to the Calendar.

4. Looking for that website? All websites we use can be found on the sgcbusiness.com delicious page. Each website is tagged. You can search by keyword e.g., insurance, to find all the websites for that topic or chapter.

5. View business and economics videos on our Youtube channel.

6. We also have a Business Library. You can view and reserve any business book or magazine online.

So check the blog and your email account on a regular basis and follow sgcbusiness on twitter.

Never miss a post on the blog by subscribing  to our RSS feed.

If you have any questions, you can ask them in the comments section of this post or email mrhannon [at] geralds [dot] ie


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Email: sgcbusiness [at] stgeraldscollege [dot] com

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