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Interest Rates, Local interest rate discussions
mullokintyre
post Posted: Jun 2 2020, 01:57 PM
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According to WBC, we should be prepared for negative rates.

From the WBC Weekly report

T
QUOTE
he RBAs current inflation and unemployment forecasts do not
envisage either reaching target objectives by June 2022 (1.5%
inflation; 6.5% unemployment rate by the end of its forecast
period). These forecasts are broadly in line with our own view
but we readily accept that huge uncertainties characterise the
current economic outlook. While risks are evenly distributed we
cannot rule out the possibility of even greater divergence from
the objectives over the next few years.
Monetary policy is now firmly fixed at an open ended QE
program targeting the three year bond rate with the cash rate
held at the effective lower bound. Until we get more clarity
around the way in which the economy develops the current
policy is appropriate.
However, a serious case can be made for the RBA to consider
further cuts and entering negative territory for the cash rate if it
becomes apparent that the economy is deteriorating even more
than is currently expected.
A small open economy with significant foreign liabilities would
certainly see a substantial improvement in the competitiveness
of the currency with further rate cuts when other major markets
are anchored at their effective lower bounds.
The second key stimulus would be the impact of lower market
rates on retail lending rates as institutional rates go negative.
Both retail deposit and mortgage rates would go lower but still
remain positive. Given Australian banks relatively low reliance
on retail deposits the clear evidence from offshore that retail
deposit rates have remained positive confirms this view.
Risks to the financial system would be further limited by the
RBA restricting its QE policy to the short end of the yield curve,
allowing longer rates to reflect inflation and growth expectations.
There may be some risks around the currency response the
policy could prove too potent but similar concerns around other
unconventional policies were misplaced and there no real reason
to expect the currency to show a non linear response.
For me, the biggest concern would be the impact negative rates
would have on expectations and confidence. Is there some nonlinear impact on expectations as rates move into negative a
sticker shock even though the same policies have been seen
abroad or does such a bold move strengthen perceptions of
the RBAs determination to deliver on its objectives?
The risks are as much about framing and communication as the
policy itself. As we have already seen with the move to ultra-low
rates and then QE, if moves come as too much of a surprise, they
can exacerbate concerns about the economy and cast doubt on
the ability of policymakers to achieve better outcomes


What of course it does not state is that it would be extremely profitable for the banks themselves.
Charging people to deposit money in the bank, then loaning that same money out to a customer at a real rate of interest has got to be a winner!
Mick (being the cynical one again).



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nipper
post Posted: May 12 2020, 08:22 AM
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Get ready
QUOTE
Futures traders are pricing in the possibility of negative US interest rates within months.

Contracts on the fed funds rate extended this week's rally as price levels shot through the 100 level across futures referencing the first quarter of 2021, indicating negative yields attached to benchmark US rates.

Federal Reserve Chairman Jerome Powell has consistently pushed back against the idea of taking interest rates negative




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Apr 7 2020, 03:46 PM
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QUOTE
Reserve Bank of Australia has left the nation's official cash rate on hold at the historic-low level of 0.25 per cent.

After an extraordinary March period – which included an emergency out-of-cycle rate cut to 0.25 per cent – RBA economists decided current quantitative easing measures were being effective.

Reserve Bank Governor Philip Lowe in his monetary statement said the virus is as much an economic crisis as it is a health crisis.

"The coronavirus remains first and foremost a very major public health issue, but it is also having very significant effects on economies and financial systems around the world," wrote Mr Lowe. "Many countries are expected to experience large economic contractions as a consequence of the public health response. Large increases in unemployment are also expected.

"Once the virus is contained, a recovery in the global economy is expected, with the recovery supported by both the large fiscal packages and the significant easing in monetary policy that has taken place".


And so say all of us



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Mar 3 2020, 08:18 AM
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In Reply To: nipper's post @ Mar 3 2020, 08:00 AM

Of course that's the RBA.

A rates drop is kind of pointless. Will just get the property market excited. And banks are wedged, can't drop the full amount but the commentariat will have a field day.



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: early birds  Pendragon  
 
nipper
post Posted: Mar 3 2020, 08:00 AM
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With eBay meeting today and co-vi running amok, it's important to distinguish monetary policy, which targets the demand side of the economy, from coronavirus, which has largely supply-side effects.

On the demand side, the effects are imited to certain sectors, but where the effect is very significant,; however there is not yet a widespread slowdown in consumption.



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Oct 31 2019, 08:31 AM
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Cost of capital. ....
QUOTE
Coles Group Treasury Pty Ltd has priced $600 million of fixed rate Australian dollar medium term notes, comprising $300 million of seven-year Notes and $300 million of 10-year Notes.

The seven-year Notes were priced with a coupon of 2.2% and the 10-year Notes were priced with a coupon of 2.65% .

Pretty easy to get a good return these days. Haha.



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 

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mullokintyre
post Posted: Aug 12 2019, 10:25 PM
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In Reply To: nipper's post @ Aug 12 2019, 09:16 PM

As both the missus and myself are in pension phase in our SMSF, we don't pay tax of any kind.
Seems a bit ridiculous, maybe even unfair, but there it is.
My accountant pointed me to this URL Capital Gains Tax
Buying and selling like there is no tomorrow.


Mick



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nipper
post Posted: Aug 12 2019, 09:20 PM
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In Reply To: nipper's post @ Aug 12 2019, 09:16 PM

There's a lot of shouting from the rooftops
QUOTE
Brace yourself for a global downturn and stock market crash

You cannot solve the problems of debt with more debt. And central bankers, well-meaning and desperate as they might be to offset the damage caused by an erratic US president, can’t create real growth; they can only move money around. At some point, the markets and the real economy must converge.

https://www.afr.com/markets/equity-markets/...20190812-p52g4o
..... or
QUOTE
In the Alice in Wonderland world of relative return and negative yielding bonds, a zero yield is very attractive.

I can’t believe I just wrote that, but I did.

For a long time global institutional managers have not entertained the prospect of buying gold because it has a zero yield.

It has no coupon and offers no dividend.

Today, a zero yield is ravishingly attractive, relatively speaking!
it might even go up



--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Aug 12 2019, 09:16 PM
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In Reply To: mullokintyre's post @ Aug 12 2019, 09:10 PM

So, Mick, you sold some, triggering CG. And then back in.

(and I picked up some PMGOLD and GDX today. Couldn't work out which was better, so I went in for both. )



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
mullokintyre
post Posted: Aug 12 2019, 09:10 PM
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In Reply To: nipper's post @ Aug 12 2019, 07:47 PM

QUOTE
so, what're you going to do?


Buy more gold.
Mick



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sent from my Olivetti Typewriter.
 
 


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