1. #1

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    Timing debt market: Isnt it easy?

    Can an investor time the market?
    Is it possible to make money by timing the market?

    There are various other questions associated with timing the market which are difficult to answer. Most of the discussion regarding timing of market has been confined to the domain of equity market. Timing stock market has always been questioned by experts. It is believed that timing the market is almost impossible for an investor given various limitations.

    While there is no doubt that timing stock market is an uphill task, timing debt market is not that difficult or relatively easier than the stock market timing?

    Let us look at some interesting aspects of debt market timing.

    Debt market is relatively much more stable than equity market: The return or yield in the debt market shows movements which are much more stable than equity market. Unlike steep fall in the equity market overnight, debt market shows limited movement during a day or week. Such fall does not impact investors much. For instance, in the current scenario in Pakistan, the rate of interest and the corresponding yield shows movement significantly only when some critical policy measures are announced by the central bank or the government. This is something known in advance in many cases as the calendar of events are know. Because of stability, the movement in the debt market can be easily predicted. It is this factor that makes timing in the debt market easy.

    Debt market replicates history more frequently: Debt market shows more consistent trend which reflects past. This means it is easy to identify whether rate of interest has peaked or not. This is turn makes prediction very easy. If the rate of interest goes up beyond a point, it is easy to lock your investment in debt product at that level.

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