oussama94
05-28-2017, 18:41
In terms of bonds, one of the most talked-about men in the history of
the ** markets is George Soros. He is notorious for being “the man who
broke the Bank of England.” This is covered in more detail in our history
section (Chapter 2), but in a nutshell, in 1990 the U.K. decided to join the
Exchange Rate Mechanism (ERM) of the European Monetary System in
order to take part in the low-inflationary yet stable economy generated
by the Germany’s central bank, which is also known as the Bundesbank.
This alliance tied the pound to the deutsche mark, which meant that the
U.K. was subject to the monetary policies enforced by the Bundesbank.
In the early 1990s, Germany aggressively increased interest rates to avoid
the inflationary effects related to German reunification. However, national
pride and the commitment of fixing exchange rates within the ERM
prevented the U.K. from devaluing the pound. On Wednesday, September
16, 1992, also known as Black Wednesday, George Soros leveraged the
entire value of his fund ($1 billion) and sold $10 billion worth of pounds
to bet against the Exchange Rate Mechanism. This essentially “broke” the
Bank of England and forced the devaluation of its currency. In a matter
of 24 hours, the British pound fell approximately 5 percent or 5,000 pips.
The Bank of England promised to raise rates in order to tempt speculators
to buy pounds. As a result, the bond markets also experienced tremendous
volatility, with the one-month U.K. London Interbank Offered Rate
(LIBOR) increasing 1 percent and then retracing the gain over the next
24 hours. If bond traders were completely oblivious to what was going
on in the currency markets, they probably would have found themselves
dumbstruck in the face of such a rapid gyration in yields
the ** markets is George Soros. He is notorious for being “the man who
broke the Bank of England.” This is covered in more detail in our history
section (Chapter 2), but in a nutshell, in 1990 the U.K. decided to join the
Exchange Rate Mechanism (ERM) of the European Monetary System in
order to take part in the low-inflationary yet stable economy generated
by the Germany’s central bank, which is also known as the Bundesbank.
This alliance tied the pound to the deutsche mark, which meant that the
U.K. was subject to the monetary policies enforced by the Bundesbank.
In the early 1990s, Germany aggressively increased interest rates to avoid
the inflationary effects related to German reunification. However, national
pride and the commitment of fixing exchange rates within the ERM
prevented the U.K. from devaluing the pound. On Wednesday, September
16, 1992, also known as Black Wednesday, George Soros leveraged the
entire value of his fund ($1 billion) and sold $10 billion worth of pounds
to bet against the Exchange Rate Mechanism. This essentially “broke” the
Bank of England and forced the devaluation of its currency. In a matter
of 24 hours, the British pound fell approximately 5 percent or 5,000 pips.
The Bank of England promised to raise rates in order to tempt speculators
to buy pounds. As a result, the bond markets also experienced tremendous
volatility, with the one-month U.K. London Interbank Offered Rate
(LIBOR) increasing 1 percent and then retracing the gain over the next
24 hours. If bond traders were completely oblivious to what was going
on in the currency markets, they probably would have found themselves
dumbstruck in the face of such a rapid gyration in yields