yield gap

The purpose of calculating the yield gap is to assess whether the equity is over or under priced as compared to bonds.

The yield gap reached a peak of 10.52 percentage points on Jan. 3, 1991, Merrill Lynch said.

This is called the Yield Gap or Yield Ratio.

There had thus emerged a 'reverse yield gap' which meant that either share prices would fall sometime or interest rates had to fall.

Yield Gap Widens "I don't know what has taken the bid out of the bond, but it doesn't move," one government-securities trader said.

Five-year Treasury bonds are now yielding about 35 basis points, or hundredths of a percentage point, less than their 30-year brethren, making the yield gap 96 percent.

Given the higher risk associated with equity, a positive yield gap (i.e. with earnings yield greater than the bond yield) would be expected.

If the yield gap is numerically large, then equity yield is higher than bond yield implying that the equity is cheap.

Whenever the so-called yield gap (long minus short rates) goes negative, and stays so for longer than two business quarters, past experience suggests that the banks get badly bruised.

Traders said the yield gap between the two-year note and the 30-year bond narrowed 4 basis points from Thursday, to 306 basis points, or hundredths of a percentage point.

Yield gap or yield ratio is the ratio of the dividend yield of an equity and the yield of a long-term government bond.

There is a large yield gap and farm loss differences between major sesame seed producers, in part because of knowledge gap, poor crop management practices and use of technology.

The sharply lower yields at the New York commercial banks have continued to widen the yield gap to the advantage of the savings institutions, which are not as aggressive in lowering yields.

The yield gap between farms in developing economies and developed economies represents an opportunity loss of over 400 million tonnes of potato, or an amount greater than 2010 world potato production.

Improvements in one or more of these yield determinants, and a closure of the yield gap, can be a major boost to food supply and farmer incomes in the developing world.

When the yield gap between 10-year and 2-year Treasury instruments narrows, it limits the ability of banks to profit by borrowing at low short-term rates and lending at high long-term rates, through mortgages, say.

Before yesterday's decline, Treasury securities were steady in light trading as the yield gap between a 2-year note and a 30-year bond narrowed to as little as 7 basis points - the smallest since May 3, 1990.

However, in the period before 19th October the yield gap had become significantly negative and for the earnings yield to rise back to parity with the bond yield a significant fall in equity prices was needed.