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> Italian and Greek bonds now have lower yields/rates (i.e., considered lower risk(?)) than US bonds That's not what rates indicate. its one component, but it

> Italian and Greek bonds now have lower yields/rates (i.e., considered lower risk(?)) than US bonds That's not what rates indicate. its one component, but its far from a straight line from higher rates to more risk. You can't really compare bonds that pay in different currencies by Rate alone.

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malfist 12d ago
Why not? Percentage is the same for dollars as it is for yen or franks or pesos
- 05hundred 12d ago
  Well for one thing, different currencies have different rates of inflation. If one currency has 10% inflation and another has 1%, the second countries bonds at 5% will have a higher real return than the first, even if the risk of defaulting were the same, so the first country will have to offer a much higher coupon to find any buyers. Also governments can influence demand, e.g. by mandating banks or pension funds buy their bonds, thereby pushing yields down, without changing the risk of default.
  - stymaar 11d ago
    > If one currency has 10% inflation and another has 1%, the second countries bonds at 5% will have a higher real return than the first It's not how it works. If both currency maintain change parity over time, then the inflation rate in one country compared to the other is irrelevant. “Real” (inflation adjusted) numbers make sense for consumers and local governments, but from an investing standpoint, the only thing that matters is the variation on FX rate. And unlike what the myth of “inflation is the loss of value of a currency” says, those are actually very loosely correlated (and it tends to be anti correlated during inflation spikes due to central banks' interests rates).
- rdm_blackhole 12d ago
  The eurozone countries' bond rates are distorted by the Euro.
- chollida1 12d ago
  > Why not? Percentage is the same for dollars as it is for yen or franks or pesos That's a fair question if you aren't int he industry. Inflation would be the best example of why you can't do that. Would you rather have a Zimbabwe bond that pays 10%(when they had 10,000% inflation a year) or a US bond that pays 5%

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malfist 12d ago

Why not? Percentage is the same for dollars as it is for yen or franks or pesos

05hundred 12d ago
Well for one thing, different currencies have different rates of inflation. If one currency has 10% inflation and another has 1%, the second countries bonds at 5% will have a higher real return than the first, even if the risk of defaulting were the same, so the first country will have to offer a much higher coupon to find any buyers. Also governments can influence demand, e.g. by mandating banks or pension funds buy their bonds, thereby pushing yields down, without changing the risk of default.
- stymaar 11d ago
  > If one currency has 10% inflation and another has 1%, the second countries bonds at 5% will have a higher real return than the first It's not how it works. If both currency maintain change parity over time, then the inflation rate in one country compared to the other is irrelevant. “Real” (inflation adjusted) numbers make sense for consumers and local governments, but from an investing standpoint, the only thing that matters is the variation on FX rate. And unlike what the myth of “inflation is the loss of value of a currency” says, those are actually very loosely correlated (and it tends to be anti correlated during inflation spikes due to central banks' interests rates).
rdm_blackhole 12d ago
The eurozone countries' bond rates are distorted by the Euro.
chollida1 12d ago
> Why not? Percentage is the same for dollars as it is for yen or franks or pesos That's a fair question if you aren't int he industry. Inflation would be the best example of why you can't do that. Would you rather have a Zimbabwe bond that pays 10%(when they had 10,000% inflation a year) or a US bond that pays 5%