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Yield curve strategies |
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Definition of Yield curve strategiesYield curve strategiesPositioning a portfolio to capitalize on expected changes in the shape of the Treasury yield curve.
Related Terms:Annual percentage yield (APY)The effective, or true, annual rate of return. The APY is the rate actually Basic business strategiesKey strategies a firm intends to pursue in carrying out its business plan. Bond equivalent yieldBond yield calculated on an annual percentage rate method. Differs from annual Bond-equivalent yieldThe annualized yield to maturity computed by doubling the semiannual yield. Capital gains yieldThe price change portion of a stock's return. Convenience yieldThe extra advantage that firms derive from holding the commodity rather than the future. Coupon equivalent yieldTrue interest cost expressed on the basis of a 365-day year. Covered or hedge option strategiesstrategies that involve a position in an option as well as a position in the Current yieldFor bonds or notes, the coupon rate divided by the market price of the bond. Dividend yield (Funds)Indicated yield represents return on a share of a mutual fund held over the past 12 Dividend yield (Stocks)Indicated yield represents annual dividends divided by current stock price. Earnings yieldThe ratio of earnings per share after allowing for tax and interest payments on fixed interest Effective annual yieldAnnualized interest rate on a security computed using compound interest techniques. Equivalent bond yieldAnnual yield on a short-term, non-interest bearing security calculated so as to be Equivalent taxable yieldThe yield that must be offered on a taxable bond issue to give the same after-tax Flattening of the yield curveA change in the yield curve where the spread between the yield on a long-term High-yield bondSee:junk bond. Indicated yieldThe yield, based on the most recent quarterly rate times four. To determine the yield, divide Indifference curveThe graphical expression of a utility function, where the horizontal axis measures risk and J-curveTheory that says a country's trade deficit will initially worsen after its currency depreciates because Liability funding strategiesInvestment strategies that select assets so that cash flows will equal or exceed Liquid yield option note (LYON)Zero-coupon, callable, putable, convertible bond invented by Merrill Liquid yield option note (LYON)Zero-coupon, callable, putable, convertible bond invented by Merrill Lynch & Co. Naked option strategiesAn unhedged strategy making exclusive use of one of the following: Long call Non-parallel shift in the yield curveA shift in the yield curve in which yields do not change by the same Parallel shift in the yield curveA shift in the yield curve in which the change in the yield on all maturities is Pure yield pickup swapMoving to higher yield bonds. Realized compound yieldyield assuming that coupon payments are invested at the going market interest Relative yield spreadThe ratio of the yield spread to the yield level. Reoffering yieldIn a purchase and sale, the yield to maturity at which the underwriter offers to sell the bonds Required yieldGenerally referring to bonds, the yield required by the marketplace to match available returns Riding the yield curveBuying long-term bonds in anticipation of capital gains as yields fall with the Spot rate curveThe graphical depiction of the relationship between the spot rates and maturity. Steepening of the yield curveA change in the yield curve where the spread between the yield on a long-term Stopping curveA curve showing the refunding rates for different points in time at which the expected value Stopping curve refunding rateA refunding rate that falls on the stopping curve. Theoretical spot rate curveA curve derived from theoretical considerations as applied to the yields of Weighted average portfolio yieldThe weighted average of the yield of all the bonds in a portfolio. YieldThe percentage rate of return paid on a stock in the form of dividends, or the effective rate of interest Yield curveThe graphical depiction of the relationship between the yield on bonds of the same credit quality Yield curve option-pricing modelsModels that can incorporate different volatility assumptions along the Yield ratioThe quotient of two bond yields. Yield spread strategiesstrategies that involve positioning a portfolio to capitalize on expected changes in Yield to callThe percentage rate of a bond or note, if you were to buy and hold the security until the call date. Yield to maturityThe percentage rate of return paid on a bond, note or other fixed income security if you Yield to worstThe bond yield computed by using the lower of either the yield to maturity or the yield to call dividend yield ratioCash dividends paid by a business over the most Bond Equivalent YieldBond yield calculated on an annual percentage rate method Effective Annual YieldAnnualized rate of return on a security computed using compound Yield CurveA graphical representation of the level of interest rates for Yield to MaturityThe measure of the average rate of return that will be earned on a labor yield variance(standard mix X actual hours X standard rate) - (standard mix X standard hours X standard rate); learning curvea model that helps predict how labor time material yield variance(standard mix X actual quantity X standard price) - (standard mix X standard quantity X standard price); process quality yieldthe proportion of good units that resulted from the activities expended yieldthe quantity of output that results from a specified input yield ratiothe expected or actual relationship between input and output Discount curveThe curve of discount rates vs. maturity dates for bonds. Par yield curveThe yield curve of bonds selling at par, or face, value. Spot curve, spot yield curveSee Zero curve. Yield a. Measure of return on an investment, stated as a percentage of price. Yield curveGraph of yields (vertical axis) of a particular type of security Yield to maturityA measure of the average rate of return that will be earned Zero curve, zero-coupon yield curveA yield curve for zero-coupon bonds; Production yield varianceThe difference between the actual and budgeted proportions current yieldAnnual coupon payments divided by bond price. yield curveGraph of the relationship between time to maturity and yield to maturity. yield to maturityInterest rate for which the present value of the bondâ€™s payments equals the price. Aggregate Demand CurveCombinations of the price level and income for which the goods and services market is in equilibrium, or for which both the goods and services market and the money market are in equilibrium. Aggregate Expenditure CurveAggregate demand for goods and services drawn as a function of the level of national income. Aggregate Supply CurveCombinations of price level and income for which the labor market is in equilibrium. The short-run aggregate supply curve incorporates information and price/wage inflexibilities in the labor market, whereas the long-run aggregate supply curve does not. Current YieldThe percentage return on a financial asset based on the current price of the asset, without reference to any expected change in the price of the asset. This contrasts with yield-to-maturity, for which the calculation includes expected price changes. See also yield. Laffer Curvecurve showing how tax receipts vary with the tax rate. Phillips CurveRelationship between inflation and unemployment. YieldThe interest rate that makes the present value of a stream of future payments associated with an asset equal to the current price of that asset. Also called yield to maturity. See also current yield. Yield curveA graph showing how the yield on bonds varies with time to maturity.
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