《货币金融学cha》PPT课件.ppt

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chapter5TheRiskandTermStructureofInterestRatesInstructor:XiajingDai previewInoursupplyanddemandanalysisofinterest-ratebehaviorinChapter5,weexaminedthedeterminationofjustoneinterestrate.Yetwesawearlierthatthereareenormousnumbersofbondsonwhichtheinterestratescananddodiffer.Inthischapter,wecompletetheinterest-ratepicturebyexaminingtherelationshipofthevariousinterestratestooneanotherYear2007-08Economics Figure1showstheyieldstomaturityforseveralcategoriesoflong-termbondsfrom1919to2002.Itshowsustwoimportantfeaturesofinterest-ratebehaviorforbondsofthesamematurity:(1)Interestratesondifferentcategoriesofbondsdifferfromoneanotherinanygivenyear(2)thespread(ordifference)betweentheinterestratesvariesovertime.Year2007-08Economics Year2007-08Economics DefaultriskOneattributeofabondthatinfluencesitsinterestrateisitsriskofdefault,whichoccurswhentheissuerofthebondisunableorunwillingtomakeinterestpaymentswhenpromisedorpayoffthefacevaluewhenthebondmatures.Bycontrast,U.S.Treasurybondshaveusuallybeenconsideredtohavenodefaultriskbecausethefederalgovernmentcanalwaysincreasetaxestopayoffitsobligations.Bondslikethesewithnodefaultriskarecalleddefault-freebonds.Year2007-08Economics Thespreadbetweentheinterestratesonbondswithdefaultriskanddefault-freebonds,calledtheriskpremium,indicateshowmuchadditionalinterestpeoplemustearninordertobewillingtoholdthatriskybondYear2007-08Economics Year2007-08Economics ConclusionAbondwithdefaultriskwillalwayshaveapositiveriskpremium,andanincreaseinitsdefaultriskwillraisetheriskpremium.Year2007-08Economics Becausedefaultriskissoimportanttothesizeoftheriskpremium,purchasersofbondsneedtoknowwhetheracorporationislikelytodefaultonitsbonds.Twomajorinvestmentadvisoryfirms,Moody’sInvestorsServiceandStandardandPoor’sCorporation,providedefaultriskinformationbyratingthequalityofcorporateandmunicipalbondsintermsoftheprobabilityofdefaultYear2007-08Economics Year2007-08Economics LiquidityThedifferencesbetweeninterestratesoncorporatebondsandTreasurybonds(thatis,theriskpremiums)reflectnotonlythecorporatebond’sdefaultriskbutitsliquidity,too.Thisiswhyariskpremiumismoreaccuratelya“riskandliquiditypremium,”butconventiondictatesthatitiscalledariskpremium.Year2007-08Economics IncomeTaxConsiderationsWhyisit,then,thatthesebondshavehadlowerinterestratesthanU.S.Treasurybondsforatleast40years,asindicatedinFigure1?Theexplanationliesinthefactthatinterestpaymentsonmunicipalbondsareexemptfromfederalincometaxes,afactorthathasthesameeffectonthedemandformunicipalbondsasanincreaseintheirexpectedreturn.Year2007-08Economics Year2007-08Economics SummaryTheriskstructureofinterestratesisexplainedbythreefactors:defaultrisk,liquidity,andtheincometaxtreatmentofthebond’sinterestpayments.Asabond’sdefaultriskincreases,theriskpremiumonthatbond(thespreadbetweenitsinterestrateandtheinterestrateonadefault-freeTreasurybond)rises.ThegreaterliquidityofTreasurybondsalsoexplainswhytheirinterestratesarelowerthaninterestratesonlessliquidbonds.Ifabondhasafavorabletaxtreatment,itsinterestratewillbelower.Year2007-08Economics TermStructureofInterestRatesAplotoftheyieldsonbondswithdifferingtermstomaturitybutthesamerisk,liquidity,andtaxconsiderationsiscalledayieldcurve,anditdescribesthetermstructureofinterestratesforparticulartypesofbonds.Yieldcurvescanbeclassifiedasupward-sloping,flat,anddownward-sloping(thelastsortisoftenreferredtoasaninvertedyieldcurve).Year2007-08Economics Year2007-08Economics Agoodtheoryofthetermstructureofinterestratesmustexplainthefollowingthreeimportantempiricalfacts:1.AsweseeinFigure4,interestratesonbondsofdifferentmaturitiesmovetogetherovertime.2.Whenshort-terminterestratesarelow,yieldcurvesaremorelikelytohaveanupwardslope;whenshort-terminterestratesarehigh,yieldcurvesaremorelikelytoslopedownwardandbeinverted.3.Yieldcurvesalmostalwaysslopeupward,asinthe“FollowingtheFinancialNews”box.Year2007-08Economics Threetheorieshavebeenputforwardtoexplainthetermstructureofinterestrates;thatis,therelationshipamonginterestratesonbondsofdifferentmaturitiesreflectedinyieldcurvepatterns:(1)theexpectationstheory(2)thesegmentedmarketstheory(3)theliquiditypremiumtheoryYear2007-08Economics ExpectationTheoryTheexpectationstheoryofthetermstructurestatesthefollowingcommonsenseproposition:Theinterestrateonalong-termbondwillequalanaverageofshort-term.Year2007-08Economics Thekeyassumptionbehindthistheoryisthatbuyersofbondsdonotpreferbondsofonematurityoveranother,sotheywillnotholdanyquantityofabondifitsexpectedreturnislessthanthatofanotherbondwithadifferentmaturity.BondsthathavethischaracteristicaresaidtobeperfectsubstitutesYear2007-08Economics letusconsiderthefollowingtwoinvestmentstrategies:1.Purchaseaone-yearbond,andwhenitmaturesinoneyear,purchaseanotherone-yearbond.2.Purchaseatwo-yearbondandholdituntilmaturityYear2007-08Economics Expectedreturnfromstrategy2(1+i2t)(1+i2t)–11+2(i2t)+(i2t)2–1=11Since(i2t)2isextremelysmall,expectedreturnisapproximately2(i2t)©2006PearsonAddison-Wesley.Allrightsreserved (1+it)(1+iet+1) –11+it+iet+1+it(iet+1)–1=11Sinceit(iet+1)isalsoextremelysmall,expectedreturnisapproximatelyit+iet+1Fromimplicationaboveexpectedreturnsoftwostrategiesareequal:Therefore2(i2t)=it+iet+1Solvingfori2tit+iet+1i2t=2©2006PearsonAddison-Wesley.Allrightsreserved Moregenerallyforn-periodbond:it+iet+1+iet+2+...+iet+(n–1)int=nInwords:Interestrateonlongbond=averageshortratesexpectedtooccuroverlifeoflongbondNumericalexample:One-yearinterestrateoverthenextfiveyears5%,6%,7%,8%and9%:Interestrateontwo-yearbond:(5%+6%)/2=5.5%Interestrateforfive-yearbond:(5%+6%+7%+8%+9%)/5=7%Interestrateforonetofiveyearbonds:5%,5.5%,6%,6.5%and7%.24 ExpectationsHypothesisexplainsFact1thatshortandlongratesmovetogether1.Shortraterisesarepersistent2.Ifittoday,iet+1,iet+2etc.averageoffutureratesint3.Therefore:itint,i.e.,shortandlongratesmovetogether©2006PearsonAddison-Wesley.Allrightsreserved 1.Whenshortratesarelow,theyareexpectedtorisetonormallevel,andlongrate=averageoffutureshortrateswillbewellabovetoday’sshortrate:yieldcurvewillhavesteepupwardslope2.Whenshortratesarehigh,theywillbeexpectedtofallinfuture,andlongratewillbebelowcurrentshortrate:yieldcurvewillhavedownwardslopeDoesn’texplainFact3thatyieldcurveusuallyhasupwardslopeShortratesaslikelytofallinfutureasrise,soaverageoffutureshortrateswillnotusuallybehigherthancurrentshortrate:therefore,yieldcurvewillnotusuallyslopeupwardExplainsFact2©2006PearsonAddison-Wesley.Allrightsreserved SegmentedMarketsTheoryKeyAssumption:BondsofdifferentmaturitiesarenotsubstitutesatallImplication:Marketsarecompletelysegmented:interestrateateachmaturitydeterminedseparatelyExplainsFact3thatyieldcurveisusuallyupwardslopingPeopletypicallyprefershortholdingperiodsandthushavehigherdemandforshort-termbonds,whichhavelowerinterestratesthanlongbondsDoesnotexplainFact1orFact2becauseassumeslongandshortratesdeterminedindependently©2006PearsonAddison-Wesley.Allrightsreserved LiquidityPremium(PreferredHabitat)TheoriesKeyAssumption:Bondsofdifferentmaturitiesaresubstitutes,butarenotperfectsubstitutesImplication:ModifiesExpectationsTheorywithfeaturesofSegmentedMarketsTheoryInvestorsprefershortratherthanlongbondsmustbepaidpositiveliquidity(term)premium,lnt,toholdlong-termbondsResultsinfollowingmodificationofExpectationsTheoryit+iet+1+iet+2+...+iet+(n–1)int=+lntn©2006PearsonAddison-Wesley.Allrightsreserved RelationshipBetweentheLiquidityPremium(PreferredHabitat)andExpectationsTheories©2006PearsonAddison-Wesley.Allrightsreserved Theimplicationoffigure5Theliquiditypremiumisalwayspositiveandtypicallygrowsasthetermtomaturityincreases©2006PearsonAddison-Wesley.Allrightsreserved NumericalExample1.One-yearinterestrateoverthenextfiveyears:5%,6%,7%,8%and9%2.Investors’preferencesforholdingshort-termbonds,liquiditypremiumsforonetofive-yearbonds:0%,0.25%,0.5%,0.75%and1.0%.Interestrateonthetwo-yearbond:(5%+6%)/2+0.25%=5.75%Interestrateonthefive-yearbond:(5%+6%+7%+8%+9%)/5+1.0%=8%Interestratesononetofive-yearbonds:5%,5.75%,6.5%,7.25%and8%.©2006PearsonAddison-Wesley.Allrightsreserved LiquidityPremium(PreferredHabitat)Theories:TermStructureFactsExplainsall3FactsExplainsFact3ofusualupwardslopedyieldcurvebyinvestors’preferencesforshort-termbondsExplainsFact1andFact2usingsameexplanationsasexpectationshypothesisbecauseithasaverageoffutureshortratesasdeterminantoflongrate©2006PearsonAddison-Wesley.Allrightsreserved MarketPredictionsofFutureShortRates©2006PearsonAddison-Wesley.Allrightsreserved Answersinbrief1.bondwithaCratingshouldhaveahigherinterestratebecauseithasahigherdefaultrisk,whichreducesitsdemandandraisesitsinterestraterelativetothatontheBaabond.©2006PearsonAddison-Wesley.Allrightsreserved 3.Duringbusinesscyclebooms,fewercorporationsgobankruptandthereislessdefaultriskoncorporatebonds,whichlowerstheirriskpremium.Similarly,duringrecessions,defaultriskoncorporatebondsincreasesandtheirriskpremiumincreases.©2006PearsonAddison-Wesley.Allrightsreserved 5.Ifyieldcurvesonaveragewereflat,thiswouldsuggestthattheriskpremiumonlong‑termrelativetoshort‑termbondswouldequalzeroandwewouldbemorewillingtoaccepttheexpectationshypothesis.©2006PearsonAddison-Wesley.Allrightsreserved 7.(a)yieldcurvewouldbeupward-andthendownward‑sloping(b)yieldcurvewouldbedownward-andthenupward‑slopingIfpeopleprefershorter-termbondsoverlonger-termbonds,theyieldcurvetendtobeevenmoreupwardslopingbecauselong‑termbondswouldthenhaveapositiveriskpremium.©2006PearsonAddison-Wesley.Allrightsreserved 9.Thesteepupward‑slopingyieldcurveatshortermaturitiessuggeststhatshort‑terminterestratesareexpectedtoriseinthenearfuture.Thedownwardslopeforlongermaturitiesindicatesthatshort‑terminterestratesareeventuallyexpectedtofallsharply.Sinceinterestratesandexpectedinflationmovetogether,theyieldcurvesuggeststhatthemarketexpectsinflationtorisemoderatelyinthenearfuturebutfalllateron.©2006PearsonAddison-Wesley.Allrightsreserved 11.Thegovernmentguaranteewillreducethedefaultriskoncorporatebonds,makingthemmoredesirablerelativetoTreasurysecurities.TheincreaseddemandforcorporatebondsanddecreaseddemandforTreasurysecuritieswilllowerinterestratesoncorporatebondsandraisethemonTreasurybonds.©2006PearsonAddison-Wesley.Allrightsreserved 13.Abolishingthetax‑exemptfeatureofmunicipalbondswouldmakethemlessdesirablerelativetoTreasurybonds.TheresultingdeclineinthedemandformunicipalbondsandincreaseindemandforTreasurybondswouldraisetheinterestratesonmunicipalbonds,whiletheinterestratesonTreasurybondswouldfall.©2006PearsonAddison-Wesley.Allrightsreserved 15.Theslopeoftheyieldcurvewouldfallbecausethedropinexpectedfutureshortratesmeansthattheaverageofexpectedfutureshortratesfallssothatthelongratefalls.©2006PearsonAddison-Wesley.Allrightsreserved