markets for goverment issuers

Question 1

dm

Answer 1

developed market

Question 2

em

Answer 2

emerging market
less stable higher yields
best indystry commodity

Question 3

ricardian equivalents (if)

Answer 3

1. taxpayers will save for the future taxes
2. taxpayers think tax not paid today equals higher tax in the future
3. capital market are perfect with no transaction costs
   4.tax savings are passed to decendents for to be paid in the future

Question 4

ricardian equivalent (then)

Answer 4

if the government want to run a deficit it is better to tax now because

government should fund themselves with a lowest possible maturity to minimize borrowing cost

Question 5

debt maturity terms matter

Answer 5

longer maturity = higher borrowing cost but greater fiscal stability

Question 6

benefits for a maturity spectrum

Answer 6

1. benchmark for other debt (10y ytm = mortgage +premium)
2. hedging interest rate risk
3. collaterall for loan
4. monetary policy and reserves

Question 7

issuance of gov debt

Answer 7

single price auction:

1. competitive - sets amount and yield (80-90%)
2. non-competitive - all the rest are being sold to people by the highest yield of the rest 20% (cut off)

Question 8

on the run bond

Answer 8

describe most recently issued bond (closest to par)

Question 9

off the run bond

Answer 9

previous issued bond. less liquid. typically own by buy and hold investor