Interest-Free Treasury Bonds (IFTB)

2019 ◽  
Vol 2 (2) ◽  
pp. 13-21
Author(s):  
Bijan Bidabad
Keyword(s):  
Practical Implication ◽  
Central Banking ◽  
Secondary Market ◽  
Similar Amount ◽  
Treasury Bonds ◽  
Treasury Bills ◽  
Liquidity Trap ◽  
Competitive Price ◽  
Treasury Bond ◽  
The Business Cycle

Purpose: Although the treasury bill is the most important monetary instrument in central banking, its application in different phases of the business cycle, especially in a liquidity trap, is not working well. To remove this obstacle “Interest-Free Treasury Bond” (IFTB) is introduced as a substitute for conventional treasury bills. Design: IFTB is a valuable paper which is issued by government treasury through a barter contract and is sold to central or commercial banks. The issuer is a debtor to the holder and has to pay back the nominal value at maturity; in addition, the issuer is committed to lending a similar amount of money to the paper holder for an equal period. Zero interest rate is nominated for lending and borrowing. Finding: IFTB is a zero-coupon, asset-backed note with no interest and is designed upon “debt equal to future loan”, or “loan equal to future debt” with “time-withdrawal right”. The paper holder can supply and transact her bond in the secondary market at a competitive price. Practical implication: It can be used as a substitute for conventional treasury bills. All conventional and non-usury systems can implement IFTB. JEL: E43, E44, E52, E58, E62, E63

scholarly journals Interest-Free Treasury Bonds (IFTB): Islamic Finance and Legal Clarifications

2019 ◽  
Vol 3 (1) ◽  
pp. 21-29
Author(s):  
Bijan Bidabad
Keyword(s):  
Practical Implication ◽  
Central Banking ◽  
Secondary Market ◽  
Islamic Banking ◽  
Similar Amount ◽  
Fiscal Policies ◽  
Treasury Bonds ◽  
Treasury Bills ◽  
Competitive Price ◽  
Treasury Bond

Purpose: Although the treasury bill is the essential monetary instrument in central banking operations, its application in Islamic banking is not legitimate because it involves usury. This implies that the system cannot apply monetary and fiscal policies. To remove this obstacle “Interest-Free Treasury Bond” (IFTB) is introduced as a substitute for conventional treasury bills. Design: IFTB is a valuable paper which is issued by government treasury through a barter contract and is sold to central or commercial banks. The issuer is a debtor to the holder, and has to pay back the nominal value at maturity to the holder; in addition, the issuer is committed to lending a similar amount of money to the paper holder for an equal period. The Shariah and legal background of IFTB is explained through new contract types of “time-barter contract” and “time-loan contract”. Finding: IFTB is a zero-coupon, asset-backed note with no interest and is designed upon “debt equal to future loan”, or “loan equal to future debt” with “time-withdrawal right”. The paper holder can supply and transact her bond in the secondary market at a competitive price. Practical Implication: It can be used as a substitute for conventional treasury bills. All traditional and non-usury systems can implement IFTB. JEL: E43, E44, E52, E58, E62, E63

Would Stimulus without Debt Weaken the Fed’s Balance Sheet?

2018 ◽  
Author(s):  
Laurence Seidman
Keyword(s):  
Federal Reserve ◽  
Balance Sheet ◽  
Open Market ◽  
Treasury Bonds ◽  
Treasury Bond

At first glance it might seem that stimulus without debt would cause the Fed to have a balance-sheet problem. Why? When the Fed buys a Treasury bond in the open market, it obtains an asset, but if the Fed gives the Treasury a transfer, it obtains no asset. But the Fed can avoid a balance-sheet problem by taking the following action. Just before the Fed writes its transfer check to the Treasury, the Fed should order an amount of new Federal Reserve notes (from the usual place, the Treasury’s Bureau of Engraving and Printing) equal to its transfer to the Treasury and then store these notes in the Fed’s vault. Cash in the Fed’s vault is an asset on the Fed’s balance sheet, so the Fed’s total assets would increase by an amount equal to the Fed’s transfer to the Treasury—the same increase in total assets that would have occurred if the Fed had instead spent the same amount of money buying Treasury bonds.

scholarly journals Liquidity Trap: the Brazilian version

2019 ◽  
Vol 4 (2) ◽  
pp. 278
Author(s):  
Fernando Ferrari Filho ◽  
Marcelo Milan
Keyword(s):  
Interest Rates ◽  
Aggregate Demand ◽  
Fiscal Policies ◽  
Treasury Bills ◽  
Liquidity Trap ◽  
Limited Impact ◽  
Income Transfers ◽  
Brazilian Version ◽  
Distribution Of Income ◽  
Very High

<p>The goal of this paper is to provide an interpretation about the sky-high real interest rates in Brazil. We use Keynes’ argument regarding liquidity trap to identify the forces trapping interest rates, but in Brazil they are trapped at very high levels instead of at the zero-lower bound discussed in Keynes’s <em>General Theory</em>. Rentiers, in Brazil, influence the Brazilian Central Bank to obtain very liquid assets in the form of Financial Treasury Bills (LFTs) while keeping high interest earnings. In this case expansionary fiscal policies will have a limited impact on output, given the resulting high debt levels and debt service, but will imply significant income transfers to the rentiers. This means that aggregate demand and income will be less sensitive to fiscal stimuli, but the distribution of income will be biased toward the rentiers. </p><p> </p>

scholarly journals Ten Years On: What Have We Learned? What Have We Done? What Must We Do?

2019 ◽  
Author(s):  
Robert C. Hockett
Keyword(s):  
Wealth Distribution ◽  
Central Banking ◽  
Secondary Market ◽  
System Structure ◽  
Labor Rights ◽  
Secondary Markets ◽  
Market Makers ◽  
Capital Ownership ◽  
Home Mortgage ◽  
National Investment

Ten years after the financial dramas of Autumn 2008, I take stock of what we have learned, what we have done, and what we have yet to do if we would avoid a repeat performance. The primary lessons I draw are that income and wealth distribution, the endogeneity of credit-money, and finance system structure all matter profoundly not only where justice, but also where systemic stability is concerned. The longer-term tasks still before us include a much broader and financially engineered diffusion of capital ownership over our population, citizen central banking, a permanent national investment authority, continuous public open labor market operations, debt-free or low-debt education and health insurance, and an updated form of segregating capital-raising primary from asset-trading secondary markets in the financial sector. Shorter-term tasks include debt-forgiveness, a restoration of labor rights and countercyclical progressive taxation, and restored citizen-ownership of our secondary market makers in home mortgage and higher education debt. These measures will restore the nation to its erstwhile status as a productive middle class ‘yeoman republic,’ and in so doing will restore both justice and efficiency to our social and economic arrangements.

Amid many unknowns, EM assets will remain strained

2017 ◽  
Keyword(s):  
Emerging Market ◽  
Treasury Bonds ◽  
Government Bonds ◽  
Content Type ◽  
Bond Yield ◽  
The Us ◽  
Equity Funds ◽  
Treasury Bond ◽  
Mexican Peso ◽  
Bureau Of Labor Statistics

Subject Emerging markets under strain from dollar rally. Significance The US Bureau of Labor Statistics reported on January 6 that average hourly earnings grew at the fastest pace since 2009 in December -- a further fillip to the ‘trumpflation trade’ that has gripped financial markets since the victory of Donald Trump in the US presidential election. Expectations of further Fed rate increases have driven the dollar index and the ten-year Treasury bond yield higher, straining emerging market (EM) assets. EM mutual equity funds have suffered a wave of uninterrupted outflows since Trump’s victory. The Mexican peso and the Turkish lira have plumbed record lows against the dollar. Impacts Many EMs are preparing to sell dollar-denominated debt in anticipation of higher borrowing costs, including Argentina, Brazil and Nigeria. Speculative bets against US Treasury bonds have risen to a record high amid expectations of higher US inflation and further rate hikes. The stock of negative-yielding government bonds stands at 10.8 trillion dollars, fuelling demand for higher-yielding securities. In April, the US Treasury’s next Foreign Exchange Report could label China a currency manipulator though the criteria would need to change.

Volatility of real return and impact of monetary policy rates on yield of the 182 days treasury bills in India

2019 ◽  
Vol 118 (4) ◽  
pp. 142-145
Author(s):  
Vijayalakshmi Pa
Keyword(s):  
Monetary Policy ◽  
Financial Markets ◽  
Central Government ◽  
Secondary Market ◽  
Treasury Bills ◽  
The Public ◽  
The Government ◽  
The Impact ◽  
Financial Securities

Central Government issues securities in financial markets to meet out its financial requirements for fulfilling its objectives towards overall economic and welfare development of the nation. Both money and capital markets help to float short term as well as long term securities before the public to tap their savings. Financial institutions, Banks, primary dealers and individuals are allowed to deal with financial securities. 182 Days Treasury Bill is also one of the instrument which cater the needs of deficit of the government.  This paper deals with   182 days treasury bills for  analysing the real return and trading of  182 days treasury bills in the secondary market and the impact of  monetary policy rates on average yield  on 182 days treasury bills and concluded that monetary policy rates have impact on 182 days treasury bills in India.

Risk Premium Information from Treasury-Bill Yields

2018 ◽  
Vol 53 (1) ◽  
pp. 437-454 ◽  
Author(s):  
Jaehoon Lee
Keyword(s):  
Risk Premium ◽  
Bond Yields ◽  
Short Term ◽  
Treasury Bonds ◽  
Yield Curves ◽  
Treasury Bill ◽  
Risk Premiums ◽  
Unique Information ◽  
Treasury Bond

I find that short-maturity Treasury-bill yields have unique information about risk premiums that is not spanned by long-maturity Treasury-bond yields. I estimate 2 components of risk premiums: long term and short term. The long-term component steepens the slope of yield curves and has a forecastability horizon of longer than 1 year. In contrast, the short-term component affects Treasury-bill yields but is almost invisible from Treasury bonds, has a forecastability horizon of less than 1 quarter, and is related to bond liquidity premiums.

scholarly journals A Critical Analysis of Volatility Surprise in Bitcoin Cryptocurrency and Other Financial Assets

Risks ◽  
2021 ◽  
Vol 9 (11) ◽  
pp. 207
Author(s):  
Yianni Doumenis ◽  
Javad Izadi ◽  
Pradeep Dhamdhere ◽  
Epameinondas Katsikas ◽  
Dimitrios Koufopoulos
Keyword(s):  
Price Volatility ◽  
Secondary Data ◽  
Financial Assets ◽  
Treasury Bonds ◽  
Blockchain Technology ◽  
Treasury Bond ◽  
High Volatility ◽  
History Of ◽  
Debt Market

The purpose of this paper is to investigate the viability as compared with other financial assets of cryptocurrencies as a currency or as an asset investment. This paper also aims to see which macro variable relates more to the price of cryptocurrencies, especially Bitcoin. Since the whole concept of cryptocurrencies is quite novel, an attempt has been made to briefly explain the underlying blockchain technology that forms the bedrock of cryptocurrencies. In this study, we use secondary data, i.e., the price history of Bitcoin from September 2014 to September 2021 for the last seven years, captured from trading exchanges. We predicted monthly returns of Bitcoin with that of Standard & Poor’s 500 Index (S&P 500), gold, and Treasury Bonds. Our findings show that Bitcoin has very high volatility compared to S&P 500, Gold and Treasury Bonds. Also, our findings show that there is a positive correlation between Bitcoin’s price volatility and the other three financial assets before and during COVID-19. Hence, Bitcoin is acting more as a speculative asset rather than a steady store of value. This can be drawn from the comparison with the debt market i.e., a Treasury Bond that invests in long-dated (30 years) US treasuries with which Bitcoin shows no relationship. The findings of this study could help with understanding the future of Bitcoin. This has important implications for Bitcoin investors. The current study contributes to the extant literature by providing empirical evidence on long-term social sustainability vis-à-vis supply chain traceability.

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