No expiration date—so there’s no such thing as a truly fixed interest rate.
Even with the same annualized figures, the positions for the remaining 30 days versus 300 days are not the same kind of financial product. Interest rate is only a percentage; it’s the maturity date that converts the abstract ratio into real, tangible cash flows. @TermMax #TermMax
TermMax binds a specific maturity date in each trading venue, which determines the borrower’s repayment time and the lender’s redemption time, and it also affects FT’s discount level. Even if the page shows the same APR, there can still be huge differences in the duration of capital occupation, risk of interest-rate fluctuations, and the depth of exit in the secondary market.
However, allowing unlimited additions of maturity dates also has drawbacks—it fragments overall order-flow liquidity. Order books in long-tail maturities may look complete, but the weighted transaction cost for large trades can deteriorate quickly. In review, you can compare the volume-weighted interest rates and the bid-ask spreads across adjacent tenors. If long-tail markets have been lacking in transactions for a long time, then you should lower your assessment of market maturity.
Insight: When evaluating a fixed-rate market, don’t focus on counting maturity dates. Instead, pay attention to sustained trading in core tenors, maturity and redemption performance, and the ability to roll and renew capital continuously.
Even with the same annualized figures, the positions for the remaining 30 days versus 300 days are not the same kind of financial product. Interest rate is only a percentage; it’s the maturity date that converts the abstract ratio into real, tangible cash flows. @TermMax #TermMax
TermMax binds a specific maturity date in each trading venue, which determines the borrower’s repayment time and the lender’s redemption time, and it also affects FT’s discount level. Even if the page shows the same APR, there can still be huge differences in the duration of capital occupation, risk of interest-rate fluctuations, and the depth of exit in the secondary market.
However, allowing unlimited additions of maturity dates also has drawbacks—it fragments overall order-flow liquidity. Order books in long-tail maturities may look complete, but the weighted transaction cost for large trades can deteriorate quickly. In review, you can compare the volume-weighted interest rates and the bid-ask spreads across adjacent tenors. If long-tail markets have been lacking in transactions for a long time, then you should lower your assessment of market maturity.
Insight: When evaluating a fixed-rate market, don’t focus on counting maturity dates. Instead, pay attention to sustained trading in core tenors, maturity and redemption performance, and the ability to roll and renew capital continuously.