Bonds and instruments
Suppose that the controversy (Zaid) of people wanted one hundred thousand dollars to invest, in a safe investment can be liquidated at any moment in the future. And that, after he consulted with the deal with them decided to buy bonds issued by the US Department of Treasury (Treasury Bonds).
What are bonds? Or instruments that may differ from the form of bonds not subject?
Bonds or instruments is a document issued by the pledges of that amount paid blogger on board while in order to solve the paid based on the recorded history on board. This needs to be clarified more.
If we go back to (Zaid), which we assume for argument he bought bonds issued by the US Department of Treasury, and also we assume that the bonds in this case from the ground category as it is written on them. He was entitled to be paid one year after the date of purchase, as it is written on it as well.
It must also be in writing on the support of all bonds listed «pledges to the US Treasury to pay the bearer the amount of thousand dollars as well as in the history».
What is the yield achieved by (Zaid) purchase of a hundred thousand of the support group? Is the purchase amount will also be a hundred thousand?
Certainly the purchase amount will be less than a hundred thousand. Although that determines the amount of the purchase, as always it happens is the demand and supply vessels and what is expected submission of the request later factors, could never be people do not rent their money free of charge. All forms of lending mean that the owner of the money temporarily gave up his money for recruitment. Completely Ktkhali property owner for the use of his property for lease.
The sale of bonds or instruments rental money only to those who pay the price for the purchase of bonds in real time to be a fulfillment of the official amount of the bond later. Lessor is the source of the bond and the bond buyer is a tenant.
Since people usually do not give up the use of their properties for free, so the case for their money, they do not abandon their use free of charge, even for a limited period. The buyer Sindh abandon the use of the price of the bond in exchange for payment of the price of the bond simultaneously to get the full amount of the bond after a while.
And the other hand for those who buy bonds and instruments comes indirectly. If you bought (Zaid) bonds promised its source, the US Treasury in this example, to pay a hundred thousand a year later those who owned, Vzad will not pay against which real-time more than 95 thousand dollars if he could achieve a return of at least 5 percent once you leave its purchase price in deposit forward in the Bank of reliable banks, as it pledged to buy bonds source to pay the amount of a hundred thousand dollars a year later, it has achieved a return exceeding five thousand. However, the issuance of bonds and instruments is not a moratorium on the ministries of the Treasury, and companies issued a day, when you find that borrowing by issuing less expensive than direct borrowing from banks.
While it is clear that the goal of buying bonds and instruments, is to achieve a return, and the goal of companies and other private enterprises is to provide liquidity self to employ them, the goal of central banks to buy bonds currency that is issued is not usually to achieve a return, but to increase the money in circulation block, which lead increase it to cut borrowing costs or benefits. And reduce borrowing costs in turn leads to increased economic activity, since the money element of the factors of production employed and if I say the cost of decreased production costs.
Since the 2008 financial disaster, «the Federal Reserve Bank» or Central American drawer on the purchase of bonds in the amount of $ 86 billion per month. The last time, and most likely will continue in the coming months the purchase of Central American bonds also $ 86 billion. It has been cut twice and is currently $ 66 billion.
As it did other central banks varying amounts of currency they issue bonds, in a collective effort to increase growth rates and reducing unemployment rates of cash in circulation by increasing the block.
Whoever gets when the British, for example, the central purchasing bonds issued in pounds sterling, it compensates bought from them simply prints the value of sterling.
As well as the Central European or American or Japanese when they buy bonds worth paying to print the currencies in which they export.
We have already, through the lean years, the Ministry of Finance that Saudi Arabia «development bonds issued» The purpose of the issuance to provide the necessary liquidity to the Saudi government to enable them to fulfill the obligations that must be met. Saudi Arabia has been selling all the bonds which were issued on the Saudi private and public facilities only.
In a nutshell, the issuance of bonds and instruments and selling them is a picture of the different borrowing Photos. Fmstraeha wants to employ his money yield. The vendor gets the liquidity of self-employed in the hope that the return will be higher than the costs of employment obtained. Investors buy the bonds and accept because of the ease liquidated. Central banks buy bonds of all kinds to increase the mass of money in circulation in the hope that this will lead to lower borrowing costs, which in turn leads to increased economic activity and reduce unemployment rates. And central banks are only allowed to a system and a law that meets the price of the bond purchase print purchase amount regardless of its size.
And all types of bonds can be sold after the purchase, it facilitates any liquidated the price to be determined by market factors. Like any other commodity vendor may achieve profit or loss in accordance with the conditions.