A similar formula, currently being used to enforce a separate mortgage settlement struck between banks and government officials in 2012, has yielded troubling preliminary results.
Comments from Treasury Secretary Lawrence H. Summers that the government would hold down borrowing costs by using the whole yield curve troubled some investors.
This implies that real interest rates may be permanently too high.In this section The temptations of yield Name theory Trouble at home Banks beaten Black ink Unhappy returns Bad habits Inelastic bands Germany's euro test Reprints Related items Britain and the euro: What a pity.
Banks are flagging.In this section The temptations of yield Name theory Trouble at home Banks beaten Black ink Unhappy returns Bad habits Inelastic bands Germany's euro test ReprintsGlobal investment banks, which did so well until the bubble burst, are now looking enviously at the exchanges' steady volume growth.
Monetary policy now looks confused.In this section The temptations of yield Name theory Trouble at home Banks beaten Black ink Unhappy returns Bad habits Inelastic bands Germany's euro test Reprints Related items Poland and the European Union: Back into the foldJun 12th 2003 Economics focus: Germany's euro testJun 12th 2003 Britain and the euro: What a pity.
Although investment-grade spreads have moved little since then, those of junk issuers have continued to tighten, from 1,100 bps in October to 730 now.In this section The temptations of yield Name theory Trouble at home Banks beaten Black ink Unhappy returns Bad habits Inelastic bands Germany's euro test ReprintsThe same pattern can be seen in emerging markets.
Perhaps that is why it is remembered so fondly.In this section The temptations of yield Name theory Trouble at home Banks beaten Black ink Unhappy returns Bad habits Inelastic bands Germany's euro test ReprintsCertainly, investment banks' bosses need to do something to earn their money besides sacking people.
Foreign investors seemed to be giving the bank the benefit of the doubt.In this section The temptations of yield Name theory Trouble at home Banks beaten Black ink Unhappy returns Bad habits Inelastic bands Germany's euro test ReprintsThat is why the current scandal is so embarrassing.
Even as yields in other trouble spots, such as Ireland, Italy and Spain, have plunged since the start of the year, Portugal's have risen.
The spike in Portuguese bond yields could signal trouble for Europe.
