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coiled spring (in this context)

English translation: ready to move

GLOSSARY ENTRY (DERIVED FROM QUESTION BELOW)
English term or phrase:coiled spring (in this context)
Selected answer:ready to move
Entered by: Peter Linton (X)

18:17 Dec 5, 2003
English language (monolingual) [PRO]
Bus/Financial / Bond market
English term or phrase: coiled spring (in this context)
[In the opinion of the writer, due to the current recovery, the yield curve should be flatter than it is.]

The bond market looks increasingly like a ***coiled spring***, with investors levered to the Fed’s virtual promise to stay on hold.

Could anyone please help me understand what the expression means in this context?

Thanks a lot,
Laura
Laura Vinti
United States
Local time: 05:57
ready to move
Explanation:
Lots more context is needed to be sure what this is about, but my guess is this:
A yield curve shows the yields on bonds that are maturing over a period of time - typically three months to 25 years. Normally this curve rises over time, because investors want better returns the longer they had to wait to get their money back. A flatter yield curve implies that they expect future interest rates to be lower, and that in turn implies lower economic growth in the future. But lower rates means higher bond prices. That may sound bizarre that first, but the logic is simple. Suppose yields are currently 10 percent on a $100 bond. Then suppose that interest rates fall to 5 percent. If that is the best you can get, you are prepared to pay $200 for a bond and that yields 10 percent nominal on the original price, but = only 5% on $200.
So the writer is saying that he expects the yield curve to flatten, implying lower future rates, and thus higher bond prices soon, and that is why the market is a "coiled spring", waiting to buy bonds, and relying on the Fed's virtual promise not to raise interest rates (which would send bond prices down).
At least that's my interpretation, and I hope some other contributors will confirm, amplify or demolish my theory.


Selected response from:

Peter Linton (X)
Local time: 10:57
Grading comment
Thanks a lot!
Laura
4 KudoZ points were awarded for this answer



SUMMARY OF ALL EXPLANATIONS PROVIDED
2 +5ready to move
Peter Linton (X)
4calm before the storm
Maria Danielson
3Pressed
Vjollca Martinson
2there is pent-up energy; the investor's actions/bond prices are being held down (artificially)
chica nueva


  

Answers


4 mins   confidence: Answerer confidence 4/5Answerer confidence 4/5
calm before the storm


Explanation:
the spring is ready to go "boing"

Maria Danielson
United States
Local time: 05:57
Native speaker of: English
PRO pts in pair: 28
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54 mins   confidence: Answerer confidence 3/5Answerer confidence 3/5
Pressed


Explanation:
waiting to burst or explode

Vjollca Martinson
Local time: 03:57
Native speaker of: Native in AlbanianAlbanian
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1 hr   confidence: Answerer confidence 2/5Answerer confidence 2/5 peer agreement (net): +5
ready to move


Explanation:
Lots more context is needed to be sure what this is about, but my guess is this:
A yield curve shows the yields on bonds that are maturing over a period of time - typically three months to 25 years. Normally this curve rises over time, because investors want better returns the longer they had to wait to get their money back. A flatter yield curve implies that they expect future interest rates to be lower, and that in turn implies lower economic growth in the future. But lower rates means higher bond prices. That may sound bizarre that first, but the logic is simple. Suppose yields are currently 10 percent on a $100 bond. Then suppose that interest rates fall to 5 percent. If that is the best you can get, you are prepared to pay $200 for a bond and that yields 10 percent nominal on the original price, but = only 5% on $200.
So the writer is saying that he expects the yield curve to flatten, implying lower future rates, and thus higher bond prices soon, and that is why the market is a "coiled spring", waiting to buy bonds, and relying on the Fed's virtual promise not to raise interest rates (which would send bond prices down).
At least that's my interpretation, and I hope some other contributors will confirm, amplify or demolish my theory.





    Reference: http://moneycentral.msn.com/articles/invest/prepare/1274.asp
    Reference: http://www.split.com/broadmarket/ycurve.asp
Peter Linton (X)
Local time: 10:57
Native speaker of: English
PRO pts in pair: 139
Grading comment
Thanks a lot!
Laura

Peer comments on this answer (and responses from the answerer)
agree  Clauwolf: just admire
17 mins
agree  milicas (X)
3 hrs
agree  Matthew Fagan
10 hrs
agree  Rajan Chopra
15 hrs
agree  Rahi Moosavi
17 hrs
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4 hrs   confidence: Answerer confidence 2/5Answerer confidence 2/5
there is pent-up energy; the investor's actions/bond prices are being held down (artificially)


Explanation:
The Fed's perceived position is constraining the 'movement' that would otherwise naturally occur. (What is implied, I think, is that there is a' hiatus', a pause, while everyone ie investors waits for the likely/necessary/inevitable adjustment...

I have no knowledge in this field, but that is how I read it...

--------------------------------------------------
Note added at 4 hrs 30 mins (2003-12-05 22:48:33 GMT)
--------------------------------------------------

Correction: should be \'investors\' actions\'

chica nueva
Local time: 21:57
Native speaker of: English
PRO pts in pair: 83
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