INFORMATION IN THE MARKETS
The global fixed income manager examines the market for information and considers big picture issues of regulations, demographics, and institutional trends before forming an opinion about the more cyclical aspects of current macroeconomic fiscal and monetary policies. There are at least two types of information they will seek:
The first set of information, economic statistics, is readily available in readable format. Some important global economic statistics are contained in Exhibit 20.6. This information is used in a historical business-cycle context to examine the present state of the economy and to derive inferences regarding the future. Pieces of economic statistical data validate or repudiate a particular forecast or portfolio theme.
The second set of important information resides in the marketplace itself. This information is generally available in price form and its meaning or importance must be derived. This market information is in the form of implied forward international government bond rates. These rates may be derived from current international government bond prices. For global fixed income portfolio managers, (1) global yield curves, (2) global money market and repo rates, (3) global public and over-the-counter (OTC) options markets, (4) global futures markets, (5) global forward markets, (6) global credit spread markets, (7) currency markets, and (8) implied breakeven inflation rates, among others, are rich sources of information. ...
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