Asset Purchase Program
What is this?
In every month we see some central banks is going to buy Asset. What is this? And what is the effect of these purchases? Here Asset means what we have to understand it. Asset is mainly Treasure Bonds or Bills. Or it may be Share of companies. But rarely it is meant shares. Normally it is meant BONDS OR BILLS. So when a CENTRAL BANK buy assets from Economy, it pushes money to the Economy. BONDS is going out of Economy so its supply is reduced, so yields is down. So Currency will strong. Again the opposite side is: when money supply is increased in the economy the Currency should devalued. So Currency will depreciate. So ultimately overall reaction is near about ZERO in the economy.
Best of luck.
Happy Trading. :)
4 comments:
the yield will go down if the supply reduced, because of the increase of market bond value, right?
yes you are right.
Bond Supply reduce= Price up= costing is high due market price rise but bond payout is same as its fix. so yield is less.
Wow, nice teaching..
Hoping that you will keep teaching us..
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