FAQ: Why Did The Corporate Spread Significantly Widen During The 2008 Market Crash?

Why did corporate spread significantly widen during the 2008 market crash?

Why did the corporate spread significantly widen during the 2008 market crash? What impact will a tightening of the corporate spread most likely have on a company?` A tendency to expand the borrowing capacity of the company.

What does it mean when a company’s corporate spread tightens quizlet?

What does it mean when a company’s corporate spread tightens? The company’s bonds are outperforming the benchmark yield.

What are the three main transmission mechanisms by which the yield curve affects the economy?

What are the three main transmission mechanisms by which the yield curve affects the economy? Corporate impact, global impact, consumer impact.

What is the primary driver of the left hand of the yield curve?

What is the primary driver of the left – hand end of the yield curve? An inverted yield curve means that bond traders are predicting interest rate cuts, and interest rate cuts happen in response to a recession. Why does the yield curve tend to invert shortly before a recession?

What does it mean when a corporate spread tightens?

The company’s corporate spread tightens when the company’s bonds are performing better than the benchmark yield. Thus, option D (The company’s bonds are outperforming the benchmark yield) is correct.

What was the output gap in 1973?

The output gap in 1973 was +3.0%.

What does it mean when a company’s corporate spread tightens BMC?

What does it mean when a company’s corporate spread tightens? The company’s borrowing capacity will become more restrictive. The company’s bonds are outperforming the benchmark yield.

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Why do company manager owner’s smile when they ring?

Answer: Company manager – owners smile when they ring the stock exchange bell at their IPO because; Managers owners receive their first stake in the company at an IPO.

Which economic indicator is most directly linked to the average person’s cost of living?

The most commonly cited measure of inflation in the United States is the Consumer Price Index, or CPI. The CPI is calculated by government statisticians at the US Bureau of Labor Statistics based on the prices in a fixed basket of goods and services that represents the purchases of the average family of four.

What is the 10 year to 3 month?

The 10 Year – 3 Month Treasury Yield Spread is the difference between the 10 year treasury rate and the 3 month treasury rate. This spread is widely used as a gauge to study the yield curve. A 10 year – 3 month treasury spread that approaches 0 signifies a “flattening” yield curve.

What generally happens when a central bank unexpectedly?

KNOWLEDGE CHECK What generally happens when a central bank unexpectedly decreases interest rates? The currency strengthens, then weakens. The currency weakens. The currency weakens, then strengthens.

Does cutting interest rates increase the cost of goods produced?

If the Fed cuts rates, it could increase what you pay for gas and even impact the cost of goods because of increased costs for transporting goods — it takes energy to transport everything we consume. If the Fed raises interest rates, it typically slows market activity. The interest payments to the bank are too high.

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What happens when a central bank unexpectedly decreases interest rates?

KNOWLEDGE CHECK What generally happens when a central bank unexpectedly decreases interest rates? The currency strengthens, then weakens. The currency weakens. The currency weakens, then strengthens.

What is the primary reason for US government bond yields?

U.S. government bonds offer higher returns than corporate bonds, so investors find government bonds a more attractive investment. All governments mandate interest rates as part of their economic policy. Non- government borrowers are slightly less safe and therefore must offer slightly lower yields.

What causes an inverted yield curve?

An inverted yield curve occurs when long-term yields fall below short-term yields. Under unusual circumstances, investors will settle for lower yields associated with low-risk long-term debt if they think the economy will enter a recession in the near future.

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