Currency Forward Rates Quotes

But there were other types of PERLS buyers who lacked the training and experience to understand them at all. They looked at a term sheet for PERLS, and all they saw was a bond. The complex formulas eluded them; their eyes glazed over. The fact that the bonds’ principal payments were linked to changes in foreign currency rates was simply incomprehensible. These are the buyers I call widows and orphans. These are the buyers salesmen love. Some PERLS buyers had no idea that the bet they were making by buying PERLS typically was a bet against a set of “forward yield curves.” Forward yield curves are a basic, but crucial, concept in selling derivatives. The most simple “yield curve” is the curve that describes government bond yields for various maturities. Usually the curve slopes upward because as the maturity of a government bond increases, its yield also increases. You can think about this curve in terms of a bank Certificate of Deposit: You are likely to get a higher rate with a five-year CD than with a one-year CD. A yield curve is simply a graph of interest rates of different maturities.

China is now Asia’s least equal society with 1% of the population controlling more than a third of the country’s wealth, most of which is tied up in property. Alarmingly, China’s property vacancy rate is estimated to be 22%, suggesting that 49m homes are sitting empty and have been bought by wealthy speculators. That equates to around 30% of all apartments sold in the past decade. How long can the bubble continue given such a large number of empty and expensive apartments?