Ivankiv offers another recommendation: “Our analysts believe both Australian and British long-term yields will decline more than long-term German yields over the coming year, with Australian long-term yields falling the most by a wide margin. The British yield curve is more steeply sloped than the Australian. Rather than remain invested in bunds, Kuaminika could invest in either British gilts or Australian government bonds and hedge the currency risk back to the euro with a rolling three-month foreign currency forward. There are, however, some issues to keep in mind:
Issue 1: The British gilt market is likely better for investment because its steeper yield curve provides larger benefits from ‘riding the curve.’
Issue 2: In order to properly account for the cost/benefit of eliminating currency exposure, hedge gains or losses should be measured relative to forward foreign exchange rates.
Issue 3: The rolling hedge will generate a profit (loss) if the spread between the short-term German yield and the short-term Australian or British yield increases (decreases) over time.”
Q. If all long-term rates fall as expected, which of Ivankiv’s issues regarding investment in the British gilt or Australian Treasury markets is least likely correct in the context of an inter-market trade?
- Issue 1
- Issue 2
- Issue 3
选项1 是因为英国长期利率会下降所以不对吗?