Newbie stock market qns

[teehee93]

interest rate i look at 10 year risk free rate

the rest like sibor, libor, what ever bor, i dont care

i see, how would you use the 10 year risk free rate in your analysis?

 

[teehee93]

Great question. I'm not a rates trader, just a mug punter, so if any actual SGD rates traders want to jump in and correct me go ahead.

So as you've probably guessed, there's not just one "interest rate" out there. There are lots of rates for lots of different tenors, lots of different instruments, and lots of different credit qualities.

When people talk about interest rates moving, though, it's usually talking about one of a couple of interest rates that people really pay attention to. Those are the rate on a mortgage (because that's the vast majority of people's debt), or the central bank's interest rate target.

In most countries that aren't Singapore, the level of interest rates is controlled by the central bank. The central bank picks a "target" level for short-dated interest rates: in Australia, that's the RBA overnight cash rate; in the USA, it's the overnight Fed Funds rate. (In Switzerland it's 3mth CHF LIBOR, which, they must be feeling a bit sheepish after the whole LIBOR rigging omnishambles.) The bank then adds or removes liquidity from the banking system to drive the target rate to the desired rate.

And if the central bank wants to slow the economy down (usually to restrain inflation), they withdraw liquidity from the system to raise that short-dated interest rate. That propagates through the yield curve because reasons, and that drives up the price of every loan in the economy. If they want the economy to run a little hotter, they do the opposite - lower the target rate and inject liquidity.

In countries that are Singapore, the central bank says "**** it, we're going to target the currency instead of interest rates, blah blah small open economy blah blah New Zealand? never heard of it blah blah wibble" and the end result is that interest rates end up pretty tightly linked to US and European interest rates (and Chinese interest rates, which are basically linked to US interest rates as well). This means that interest rates are completely unsynchronised with the business cycle, so booms and busts are both bigger than they would be without the moderating influence of a competent central bank.

In Singapore, the rate that people talk about when they talk about interest rates is usually SIBOR or SOR. SIBOR is basically like LIBOR but for SGD; SOR is a SGD interest rate that's derived from the USD LIBOR rate and the USDSGD forward rate (I think? memory's a bit fuzzy here). Basically they're like LIBOR; the rate you pay for your mortgage is probably pegged to these.

Yes I am confused with the different types of interest rates. I know what the different types are, but I just dk what ppl mean when they refer to interest rates

 

[wahkao3]

i see, how would you use the 10 year risk free rate in your analysis?

use 10 year risk free to derieve an intrinsic value of the equity asset
then can compare it with market value

if intrinsic value is below market value, means its overvalued
if intrinsic value is above market value, means the stock is undervalued and its a good idea to buy

 

[Shiny Things]

Yes I am confused with the different types of interest rates. I know what the different types are, but I just dk what ppl mean when they refer to interest rates

Like I said, it depends on the context. In Singapore, if someone says "interest rates have gone up", they're probably either talking about SIBOR or their mortgage rate (which is kind of synonymous since mortgage rates are usually spread-over-SIBOR or spread-over-SOR). In America, they're probably talking about the 30-year fixed mortgage rate, or the Fed Funds rate.

 

[teehee93]

Like I said, it depends on the context. In Singapore, if someone says "interest rates have gone up", they're probably either talking about SIBOR or their mortgage rate (which is kind of synonymous since mortgage rates are usually spread-over-SIBOR or spread-over-SOR). In America, they're probably talking about the 30-year fixed mortgage rate, or the Fed Funds rate.

What about when ppl talk about market interest rates with regards to bonds? I know in general if interest rates go up, the market price of bonds will go down.

 

[Shiny Things]

What about when ppl talk about market interest rates with regards to bonds? I know in general if interest rates go up, the market price of bonds will go down.

That's all you need to know really. If the price of a bond goes down, its interest rate goes up by definition.

 

[teehee93]

What about cum dividend and ex dividend? If i hold a stock before cd i will get dividend?

 

[Dividends Warrior]

What about cum dividend and ex dividend? If i hold a stock before cd i will get dividend?

You must hold the stock until XD.

If u sell before XD, you will not get the dividend.

If u sell on or after XD, you will still get the dividend.

 

[teehee93]

You must hold the stock until XD.

If u sell before XD, you will not get the dividend.

If u sell on or after XD, you will still get the dividend.

Then what is 'buy in last cum date'? because i see most announcents the buy in last cum date is later then the XD.

 

[kebinu]

Then what is 'buy in last cum date'? because i see most announcents the buy in last cum date is later then the XD.

Just refer to x date ok liao.

The other date is just following 2 working days after x date.