tag:blogger.com,1999:blog-8152901575140311047.post7093058462391973481..comments2024-03-28T12:49:46.624-04:00Comments on Musings on Markets: What is going on with the inflation indexed treasuries?Aswath Damodaranhttp://www.blogger.com/profile/12021594649672906878noreply@blogger.comBlogger14125tag:blogger.com,1999:blog-8152901575140311047.post-24694312267936317682014-04-17T12:51:16.332-04:002014-04-17T12:51:16.332-04:00New Year Party is a great fun.We enjoyed on a beac...New Year Party is a great fun.We enjoyed on a beach with some of close friends.But it is necessary to plan out for a trip in a year which will refresh you.<a href="https://www.passbeemedia.com/digital-event-tickets/" rel="nofollow">Event tickets on passbook</a>Event tickets on passbookhttps://www.passbeemedia.com/digital-event-tickets/noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-14262061822510692882014-03-27T04:44:49.449-04:002014-03-27T04:44:49.449-04:00I have only taken a few guitar lessons in my life....I have only taken a few guitar lessons in my life. One of my teachers was a rather old gentleman. He had encouraged me to ask open-ended questions. Well, one answer he gave me has stayed with me nearly 40 years. <a href="http://www.hangmanvapes.com.au/6thelement4.html" rel="nofollow">herbal vaporizers Australia</a><br />herbal vaporizers Australiahttp://www.hangmanvapes.com.au/6thelement4.htmlnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-36487892605245889672014-03-19T14:24:38.669-04:002014-03-19T14:24:38.669-04:00I do believe to get a couple distinct cases: exces...I do believe to get a couple distinct cases: excessive inflation, as well as deflation; the two quite related to, but since the market has but to see your liquidity influence of decrease in rates of interest, bailout, value in banking companies your thesis retains finest with regard to deflation. In cases like this actual rates of interest needs to be above nominal, even so there is certainly still a tiny probability of greater inflation that when you alter anticipation <a href="http://www.passbeemedia.com/create-store-cards/" rel="nofollow">Create store cards</a> consequently supply you with a small distribute as well as inflation expectation. Basically this is a combination of excessive probability (80%) of deflation (-1 as well as 1. 5%) including a small probability (20%) of excessive inflation (8-10%).Create store cardshttp://www.passbeemedia.com/create-store-cards/noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-48317357502014060312008-11-04T16:21:00.000-05:002008-11-04T16:21:00.000-05:00Professor Damodaran,After reading all the comments...Professor Damodaran,<BR/><BR/>After reading all the comments, I'm still not sure why the TIPS are being priced the way they are now. But, it does seem that a real YTM of 3.5% or better on these ultrasafe investments is a good deal. There is one caveat though, the prospect of deflation. It does seem like the spread against treasuries appears to say the market is expecting deflation. As an investor, I'd buy recently issued TIPS, so that even if there is deflation you'd only be subject to losing the most recent inflation accrual, since the bonds can't go below par. In the unlikely event that we experience long-term deflation, these bonds would actually perform better, since they'd be generating interest on the original par value.<BR/><BR/>Any comments?<BR/><BR/>Also, I've been unsuccessful in finding on-line discussion blogs on TIPS and if anyone knows of any, I'd appreciate the link.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-76213604281067491412008-10-29T03:36:00.000-04:002008-10-29T03:36:00.000-04:00Professor Damodaran,The Cleveland Fed's website ac...Professor Damodaran,<BR/><BR/>The Cleveland Fed's website actually discusses liquidity concerns re: TIPS and adjusts the expected inflation estimate as derived from TIPS for liquidity purposes:<BR/><BR/>http://www.clevelandfed.org/research/data/tips/index.cfm<BR/><BR/>Nonetheless, expected inflation as derived from TIPS has come down despite the Cleveland Fed's "liquidity adjustments."<BR/><BR/>Best,<BR/>HenryTrue Northhttps://www.blogger.com/profile/17309318407120824418noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-92216960078866172622008-10-24T07:57:00.000-04:002008-10-24T07:57:00.000-04:00I believe to be two distinct scenarios: high infla...I believe to be two distinct scenarios: high inflation, or deflation; both very concerning, but as the market has yet to see the liquidity effect of decrease in interest rates, bailout, equity in banks the thesis holds best for deflation. In this case real interest rates should be above nominal, nonetheless there is still a small probability of higher inflation which when you adjust expectations accordingly give you a small spread or inflation expectation. In other words it is a combination of high probability (80%) of deflation (-1 or 1.5%) plus a low probability (20%) of high inflation (8-10%).Gianni y Danielahttps://www.blogger.com/profile/08843352734788055691noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-31751364684660565992008-10-22T03:47:00.000-04:002008-10-22T03:47:00.000-04:00Hi,There was a message that US govt poured some US...Hi,<BR/><BR/>There was a message that US govt poured some USD 3,5 trln to manage crisis so far and Paulson's 700 bln was not the first injection. Unfortunatly I can't manage to find the link now.<BR/><BR/>With simultaneous fed rate and eurobank interest rate reductions we might not notice dollar deflation effect? <BR/><BR/>1. Overall, aren't there many factors for dollar inflation to be much greater then nominal yields indicate?<BR/><BR/>2. Re: risk premium. Is there a possibility that S&P decline is caused by liquidity problems and investors willing to close their positions? I.e. that factor other then implied risk premium affects company's cap?Georghttps://www.blogger.com/profile/01403993929302508626noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-20114526973473272462008-10-19T09:56:00.000-04:002008-10-19T09:56:00.000-04:00I will go with explanation #2. With the economy go...I will go with explanation #2. With the economy going into deep recession and falling commodity prices I think inflation expectations have come way down. Is it justified given the liabilities the US government has just taken on? Unlikely, but who knows.<BR/>As for the 10 year treasuries, that’s where I think you have the real bubble, with flight to safety keeping rates lower than they should be. <BR/>Finally, I would love to get 3%+ inflation. The problem is that I don’t trust the official CPI numbers to give me protection against the “real world inflation”.Unknownhttps://www.blogger.com/profile/13990655072422147550noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-3852514495303300092008-10-19T07:58:00.000-04:002008-10-19T07:58:00.000-04:00I think pat I is right though I am amazed at the m...I think pat I is right though I am amazed at the move in an investment that is supposedly low risk. An illustration of why liquidity matters in a market like this one and why convergence trades may get you into trouble, unless you can afford to wait out the crisis.Aswath Damodaranhttps://www.blogger.com/profile/12021594649672906878noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-9593543863435712932008-10-18T19:45:00.000-04:002008-10-18T19:45:00.000-04:00If I'm not mistaken, most inflation indexed bonds ...If I'm not mistaken, most inflation indexed bonds are held in non-taxable accounts because the principal adjustment is taxable but doesn't produce cash flow. This probably makes them less liquid than taxable treasuries. It might only take a couple of large non-taxable institutions dumping these bonds to drive up the yields.Pat Larkinhttps://www.blogger.com/profile/13109246094505959468noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-51365431576907091112008-10-18T18:01:00.000-04:002008-10-18T18:01:00.000-04:00Can this be a reason for the rise in rates of infl...Can this be a reason for the rise in rates of inflation indexed treasuries that generally inflation indexed treasuries are more illiquid in nature with lesser number of investors?Gaurav Mehtahttps://www.blogger.com/profile/06728937525354512495noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-83784901713077965362008-10-18T17:17:00.000-04:002008-10-18T17:17:00.000-04:00Can this be a reason that inflation indexed treasu...Can this be a reason that inflation indexed treasuries are generally more illiquid than nominal return bonds?Gaurav Mehtahttps://www.blogger.com/profile/06728937525354512495noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-5382771461276379462008-10-18T16:11:00.000-04:002008-10-18T16:11:00.000-04:00Good point about liquidity but the populations tha...Good point about liquidity but the populations that hold these bonds can be very different and consequently be affected by illiquidity.Aswath Damodaranhttps://www.blogger.com/profile/12021594649672906878noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-59883327699314198452008-10-18T15:50:00.000-04:002008-10-18T15:50:00.000-04:00Hi,Is this not then a good bet for convergence tra...Hi,<BR/><BR/>Is this not then a good bet for convergence trade - Short sell nominal return bonds and long inflation indexed bonds? i.e, for that small community who still have liquidity.<BR/><BR/>About the point of liquidity. Shouldn't lack of liquidity apply equally if not more to nominal return bond subscribers also?Mahesh Sethuramanhttps://www.blogger.com/profile/01909074683189926487noreply@blogger.com