Is the Future in T-Bond Trading?

Bojkova, Viara (2011) Is the Future in T-Bond Trading? Global Policy Institute Policy Paper (19). pp. 1-7.


The intention of this short macroeconomic analysis is to discover whether the T-bonds trading will become a major factor in investment decisions of individual and institutional investors in the near future. The aim is to shed some light on such a trend coming from the global capital markets that might shape a new investment environment.

For the last three decades before the 2007 crisis, the global economy has experienced a progressive reduction in real interest rates as a result of a significant decline in investment returns in advanced economies1. This process was supported by world savings exceeding world investments. However, recently we observe an increasing physical investment demand in emerging markets that is anticipated to put upward pressure on real long-term rates2. Higher rates would enable investors to earn better returns from fixed-income securities and possibly rebalance markets and maturities.

If, as anticipated, real long-term rates increased, such as the real yield on a 10-year Treasury bond, the shift away from fixed-income instruments towards equities and alternative investments or pure liquidity could be reversed. These expectations predetermined the interest in looking at the investment decisions, particularly of institutional investors, to find out whether there is a shift towards T-bond holdings.

GPI policy paper no.19.pdf - Published Version

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