Foreign Exchange (FOREX, FX), Currency Markets Strategy »

The foreign exchange market operates through a highly sophisticated network of telecommunications systems, which link the numerous FX dealers, and brokers located in all of the major cities of the world. The participants in the FX market include those who have underlying commercial and financial transactions denominated in foreign currencies. This group includes importers and exporters, and those investing or borrowing from overseas. In addition to these participants, there are speculators who buy and sell foreign currencies in the expectations of making a profit from exchange rate movements, and there …

Interest Rates Explained »

In forming a view on the future course of interest rates, it is necessary to recognise that changes in monetary policy interest rate settings are likely to affect the state of the economy, which in turn affects interest rates generally. For example, when a policy-induced increase in interest rates causes a reduction in the pace of economic growth, the demand for funds begins to decline and the rate of interest begins to ease. Furthermore, there is likely to be an accompanying reduction in the rate of inflation, thus causing interest …

Government Bonds Mechanics and Strategy »

Government needs to fund its operational and capital expenditures, as does business. The main source of revenue for the government is taxation receipts; however, as times, expenditures exceed receipts and the government has a budget deficit. When the Government’s annual budget is in deficit, the government borrows from the public through the sale of medium-to-longer-term Treasury bonds
Within a financial year, the government will experience a mismatch of its cash flows, and will need to raise short-term funds to smooth out is cash flows over time. To fund those months, and …

Debt Finance and Loans Explained, Long Term Debt Avenues »

Where possible, a business should match the maturity and repayment schedule of its debt with the cash flow patterns of its investments that are being financed through debt. For investments of a medium-to-longer-term nature, the debt should be of a similar term. There are numerous arrangements and instruments of medium-to-longer-term debt. Such debt may be intermediated finance provided by financial institutions, or it may be direct finance obtained from either the domestic or international capital markets.
The simplest form is the term loan facility, available through banks and money market corporations. …

Debt Finance and Loans Explained, Functions of Banks, Short Term Debt Avenues »

Short-term debt is available from a range of institutions including banks, merchant banks, investment banks and finance companies. The debt may take a variety of forms, ranging from a loan to a situation in which the borrower sells a financial instrument directly into the market and promises to pay the holder of the instrument its face value on the maturity date. The form that the debt will take is normally determined by the credit rating of the issuer, the size of the funding requirement, and the preferences of the investors.
In …