Nowhereland, Kansas, issued a three-year municipal bond in 2017 to raise funds to build a supersonic highway. It’s now 2019, and interest rates are dropping like it’s hot. You bet your bottom dollar they’re going to take that and run with it. They’ll issue a new muni at the lower interest rate to bring cash in, and then call the higher rate bond on the call date.
In the meantime, funds generated by the lower rate bond will be parked in treasuries to make a profit. Hence the awesomeness of arbitrage, making money from a change in going rates. Cha-ching.
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Finance: What is the Fast Market Rule?11 Views
Finance a la shmoop what is the fast market rule? okay things get crazy here [Two guys riding a rollercoaster]
whoa and every now and then there's a leap well blimey, that's how things work
here on the London Stock Exchange.....
the fast market rule accommodates the chaos by giving brokers and other market
makers the freedom to trade outside the ranges published to the exchange why is
this needed? well because we live in a world of robots and artificial
intelligence and fat thumbs that hit the wrong keys and hackers from Russia China
and Mars all of whom can profit from chaotic disruption if you want to see
this phenomenon in its finest form well check out Jack Nicholson in the original [Man stood next to Jack Nicholson as Joker]
Batman movie and that was the best one so the logic revolves around the fact
that today even with all our massive computing power we would still rather
rely on human beings when you know the congressman hits the fan then assume
that a computer will be clever enough to figure out what's wrong quickly you know
when the world is on a collision course with chaos all over the place fast [Meteor strikes Earth]
market rule, humans over robots...
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