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What Is Yield Spread? The yield spread is the difference in yield between two different bonds. Investors use the yield spread to measure the relative value of two different securities, particularly as it pertains to credit quality but also to liquidity and supply, which can influence bond prices and yields. Yield spread is measured in basis points. Most commonly, yield spread is measured against a benchmark, usually the yield on…
What Are Annuities? An annuity is a contract in which an insurance company agrees to pay out a guaranteed sum of money to an investor, called the annuitant, for a specified period. The investor hands over a sum of money, either in a lump sum or over a period of time, to the insurance company, which agrees to make payments, usually monthly or quarterly, to the investor. Payout periods can…
Over the course of human history, certain periods of time have proven especially tumultuous. Racial divides, famine, pandemic and political upheaval all pose unique challenges. In some cases, these events stimulate extreme social conflict. From the late-18th century French Revolution to the end of South African aparthied 200 years later, civil unrest has been a disrupter of financial markets, economic systems and the global currency exchange. Although the forex is…
What Is A Haircut? A haircut in finance has several meanings. It most commonly refers to the reduced value of a financial asset for purposes of calculating capital requirements, a lending margin or collateral level. It also refers to a loss an investor may have to take or accept on an asset. It means the difference between the bid and asked price of an asset as well, with that difference…
What Is A Discount Window? The discount window is the mechanism through which central banks lend short-term money to the commercial banks under their authority, both to provide liquidity to the financial system and to manage their monetary policies. In the U.S., commercial banks—both based in the country and foreign-based—can borrow from the discount window at the 12 regional Federal Reserve Banks located around the country. Each of the 12…
Throughout the COVID-19 pandemic of 2020, emerging market (EM) currencies faced a collection of unprecedented challenges. As a result, many EM currencies experienced a swift devaluation due to falling commodity prices and a large-scale migration to financial safe-havens. Although renowned for their volatility, these currencies encountered extreme forex turbulence as COVID-19 brought the global economy to a standstill. What Is An Emerging Market Currency? An EM currency is one that…
During periods of crisis, gold has proven to be a time-honored safe-haven asset. Scarcity and built-in utility have made the yellow metal a sought after commodity throughout recorded human history. Whether in physical or paper form, gold bullion is the world's go to financial hedge against uncertainty. Gold's validity as a financial safe-haven underwent a formidable test during the novel coronavirus (COVID-19) pandemic of 2020. Traders, investors, central banks and…
Over the course of human history, gold (XAU/USD) has played a wide range of tangible and financial roles. Whether as a means of exchange, artisan medium, or store of wealth, acquiring bullion piques the interest of people from all walks of life. South Africa (SA) is among international leaders in gold exploration and production. Surveys from Thomson Reuters show SA to rank 8th globally in production of bullion, just ahead…
The South African rand (ZAR) is a free-floating currency, local to Africa's second-largest economy. Operating without a commodity or currency peg, the rand's value is relative to evolving levels of supply and demand. As individuals, banks, corporations and foreign nations stockpile the rand, it appreciates in value. Conversely, a perceived lack of worth depresses demand, leading to bearish pressure being placed on the ZAR's forex performance. According to the Bank…
According to the Bank of International Settlements' (BIS), the foreign exchange market accounts for US$6.6 trillion in aggregate daily turnover. Monies of all types contribute to this enormous figure, making the forex the largest marketplace in the world. Among the most prominent are the major, minor, exotic and commodity currencies. By definition, a commodity currency (also known as "commodity dollar" or "comdoll") is one that exhibits a quantifiable correlation to…
On 8 March 2020, Russia and Saudi Arabia initiated the first large-scale oil price war since 2014. Following a breakdown of negotiations between the OPEC+ members, there were extreme price cuts and production hikes. Subsequently, global oil values swiftly collapsed, led by a sudden 33.8% loss in U.S. benchmark West Texas Intermediate (WTI) crude oil futures. The price destruction of the 8-9 March 2020 trading session was not confined to…
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