About Bonds

The things which contribute to price levels and action in the financial markets are numerous and diverse, and their influences can vary through time, and across different markets. This article identifies the different types of Economic Data influences and the role they play.

Bond In Investing Savings There are two ways economic information can influence prices. The first is in the macro sense. Macroeconomic inputs include:

• Interest Rates


• Economic Growth (GDP)


• Government Budget Surpluses/Deficits


• Trade Balances


• Commodity Prices


• Relative Currency Exchanges Rates


• Inflation


• Corporate Earnings (both for individual companies and the broad collection)
  

These elements will generally all have long-term inputs in to the pricing of any given market. They do not tend to move in sharp, dramatic fashion, so their influences also tend to be seen over longer periods of time.

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That said, the release of economic data related to the above can be seen to have serious impact in the short-term activity in the markets. This comes primarily in the form of data releases. Some of the most important are:

• Employment Data


• Trade Data


• GDP growth figures


• Consumer & Producer Inflation rates


• Retail and Wholesale Sales


• Confidence & Sentiment Readings (U. Michigan survey, etc.)


• Income & Spending


• Production


• Interest Rate policy decisions


• Earnings releases
  

The markets can react in very, very dramatic fashion to these releases when they are out of line with expectations. The foreign exchange market, namely the EUR/USD exchange rate, provides a striking example.

A borrowers normal annual income, including overtime that is regular or guaranteed.Salary is usually the principal source, but other income may qualify if it is significant and stable. Market participants look to U.S. Government economic releases as an indication of the economy's strength and general direction. Overall, economic indicators reflect the rate of economic growth and inflation which, in turn, affects interest rates. There is an inverse relationship between interest rates and bond prices. If the economic indicators indicate that the rate of inflation is on the rise, it will most likely result in higher interest rates and lower bond prices. Conversely, if these indicators indicate the rate of inflation is falling this will result in lower interest rates and higher bond prices. The following glossary defines what these indicators are and how they might affect the bond market.

James Bond Trading Card On one Friday morning at 8:30 Eastern the monthly Non-Farm Payrolls report hit the wires. This report (released on the first Friday of each month) probably provides the most short-term volatility across all market sectors of any regular economic release. When the data comes in well off of market expectations, fireworks can ensue, as was the case in the example. Over the course of about 2-3 minutes EUR/USD fell more than 20 pips, turned around and rose about 60 pips, then fell back down to near where it had been before the data was announced (a pip being 1/10,000 of a Dollar). It then proceeded to run nearly 100 pips higher in fairly steady fashion over the course of the next hour.

Along with the economic data and positioning, market participants have also been taking notice ahead of the G7 meeting.

Bond In Investing Stock Here is another example, this time of T-Bond futures.

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Municipal Bonds Investment When those payroll figures were released at 8:30 the market dropped more than two full points. One point on the T-Bond futures contract is worth $1000, so each contract fell more than $2000 in about two minutes. Consider that the margin on a contract at the time was probably around $2500. That means a trader could have lost more than 80% on the trade in the blink of an eye.

The EUR also suffered from the drop in global financial markets as we mentioned above however the stability was seen only after the ECB added 61.05 billion Euros in liquidity to financial markets. Generally, traders are holding their breath regarding the latest developments in the world's economies, as the sub prime crisis is hovering above and threatening the market with a colossal collapsing. Traders need to be cautious with their bonds and yield investments and should be considering the Forex market as a defense mechanism for their investment.

Bond Terms Trading It is also important to understand that in the futures pits such data events often result in fast market conditions. This means that the action is so hectic that there may literally be trading going on at several different prices in different parts of the pit. This is a risk of having open positions at the time of a major news release. The market may snap back fairly quickly, as in the chart above, but in the meantime the trader's positions may have been liquidated on a stop order at a substantial loss.

Bond Debt High In Inside Fortunately, all major economic releases are well documented. They are done on a pre-announced calendar which is readily available on any number of web sites, and of course in the business news media. In the vast majority of cases, one can also find out ahead of time from any number of sources what the expectations are for the release.

Bond Greenville Greenville Foreknowledge of pending data events may not prevent losses which may result from unexpected figures. It will, however, allow the trader to recognize and understand when risks are increased. Make sure, especially if you are a short-term trader, to know what data is coming out. It can make a difference in your performance.

Trading Stock And Bonds
John Forman is author of The Essentials of Trading, and a near 20 year veteran of trading and analyzing the markets. John is Managing Analyst & Chief Trader for Anduril Analytics, which offers free trading reports here.

Bond Investing Municipal

Basis Bond Finance Hill John Forman, author of The Essentials of Trading, is a near 20-year veteran of the financial markets. He holds an MBA from the University of Maryland and a BS from the University of Rhode Island, both concentrating in Finance.

John has traded just about everything an individual trader is likely to trade. He has worked as an analyst in the foreign exchange, fixed income, and energy markets, and has published literally dozens of articles on market analysis and trading methods. John is the former Content Editor for Trade2Win, a trader support web site with over 50,000 members, where he interacted regularly with active traders from across the globe. He is also a regular speaker to college finance student groups and helps finance faculty integrate trading elements in to university course offerings. In fact, The Essentials of Trading was developed based on his work in designing trading course materials and curriculum outlines.

Currently, John is a principal of, and the Managing Analyst & Chief Trader for Anduril Analytics. He is also a contributor to Trading Markets.

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