JPMorgan Asset Management is an Open-Ended Investment Company (OEIC). It has been dedicated to customer's financial needs for over 130 years. J.P. Morgan Asset Management, the investment arm of J.P. Morgan Chase, is one of the largest active asset managers in the world and provides a complete range of investment solutions for every type of investor. It is considered in one of the leading listed companies in FTSE250. It's having number of financial industries as its sub-industry. JPMorgan Asset Management sells investments, life assurance and pension products. It is authorised and regulated in the UK by the Financial Services Authority under registration number 122754. JPMorgan investment funds generally available in the United Kingdom and elsewhere.
UK YIELD CURVE ANALYSIS
Yield curve is known as the relation between interest rates of the borrowing and the maturity of the guilt for the borrower. The yield curve graph shows the range of short term and long term plots of the given similar quality of guilt against the maturities.
The yield curve shows the different types of yields that are presented on bonds of different maturities. It helps the investors to take a glance quickly to differentiate the yields offered by short term, medium term and long term guilt.
NORMAL YIELD CURVE:
The yield curve can take three primary shapes. The line is sloping upwards if the short term yields are lower than long term yields. This curve is considered as positive or normal.
INVERTED YIELD CURVE:
When the line is sloping downwards, it is considered that the short term yields. Here the curve is referred to as inverted or negative yield curve.
FLAT YIELD CURVE:
Flat yield curve shows uncertainty in the economy. In flat yield curve bonds have almost same yields no matters they are long-term or short-term.
According to the figure of UK Yield Curve given above, it is clear that at the initial stage from the month 1 to 6 the curve is flat. This means that the condition of the economy is uncertain. Flat curve shows that the long term and short term yields are same. This happens because people think that the market is not going to increase in near future. However, the rate of interest is around 0.47% at this level of curve. But due to the speculative nature of the market, the curve is going up after the month 6 to year 2. This change in the curve suggests that the market condition has now improved and the rate of interest has gone up comparatively from 0.47% to 1%. This change in the nature of the curve is considered as normal yield curve. Hence, the curve is moving upward direction the curve is in normal condition and the market has taken sudden height by increasing the interest rates. As a result, people can now invest for more long term yields to generate higher returns. After that, the curve has taken more height than before, moving to almost 3.75% from 1%. This increase in rate of interest shows that the curve is now steeper. It is called steep because the percentage change in the rate of interest is more than 2%. When this happens the condition of the market can be considered as totally improved or at the peak. Moreover, the investors are more likely to be investing in long term securities rather than to go for short term, because they give higher return when the curve is steep. However, this sudden change in the market condition gives more space to speculations. Investors may get fear of sudden crash of the market. Due to the higher rate of returns investors are tend to invest in the long term securities with the intention to earn more. But along with the high return there is high risk involved. As investors invest for longer terms, it is not sure that the company would survive for that long in this highly competitive market. So there is equal risk is involved in investing for the longer term. This fear affects the market and may result into crash of the market. The same thing happened here as after 10 years the curve has still increased but it is no steeper now. It has become normal again year 15. But with this change one can notice the beginning of the downfall of the market. After that the curve has started becoming flatter again. So now it is coming to the state at which it was before at the initial stage. So now again there is no difference between short term and long term yield curves.