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-   -   BOJ goes Negative (http://www.actuarialoutpost.com/actuarial_discussion_forum/showthread.php?t=304752)

MathGeek92 01-29-2016 09:52 AM

BOJ goes Negative
 
BOJ joins the world wide phenom of negative rates.

Watch out, deflation is back on the radar as a world wide legitimate concern.

China will be ^&%$&^ off. They have been debasing their currency to spark growth and overnight, Japan just gave them the finger and undid what they have been doing.

Draconian sceanio: all out currency war or a real armed conflict

Best case: world wide extremely slow growth for the foreseable future

campbell 02-02-2016 12:58 PM

http://www.marketwatch.com/story/thi...?siteid=yhoof2

Quote:

This map shows all the central banks with negative interest rates

By Joseph Adinolfi
Published: Jan 29, 2016 1:02 p.m. ET

The Bank of Japan is the latest central bank to move its deposit rate into negative territory

http://ei.marketwatch.com//Multimedi...f-0015c588e0f6

campbell 02-04-2016 03:35 PM

http://mishtalk.com/2016/02/03/like-...nterest-rates/

Quote:

Negative Interest Rate Club

Eurozone: European Central Bank (ECB)
Switzerland: Swiss National Bank (SNB)
Sweden: Swedish National Bank (Riksbank)
Denmark: Danish National Bank (Nationalbanken)
Japan: Bank of Japan (BoJ)


Right Over the Cliff
https://mishgea.files.wordpress.com/...2/lemmings.png

In the inane attempt to get consumers to spend more money and to stave off threats of consumer price deflation, central banks keep punishing the prudent as well as those on fixed incomes.

Low interest rates foster economic bubbles. And it’s asset deflation not CPI deflation that central banks ought to fear. Even the BIS agrees with that statement. For discussion please see Historical Perspective on CPI Deflations: How Damaging are They?




MathGeek92 02-05-2016 10:10 AM

US Fed governor talks of forcing banks to test negative rates to see how they fare

Results better than expected

"But we aren't going to use negative rate"... remeber that quote from the Fed

Negative UST is in our future.. deflation is coming and the fed is panicking.

campbell 02-05-2016 11:06 AM

I'm sorry to be selfish (no, I'm not), but I'm thinking about the updates we'll have to make on the NAIC Economic Scenario Generator.

It was bad enough when we didn't anticipate a zero interest rate policy and had to adjust all the code.

Now I have to think whether the model will at all accommodate negative interest rates with simple code changes, or if we have to entirely redo

Beach Bum 02-05-2016 11:08 AM

I like that mishtalk.com site. As usual some great comments to be found:

"Be aware that negative interest rates would exist in an environment where every state and local pension plan is still assuming annual returns over 7%. They’ll try taxing people to oblivion first, then it will devolve into either bankruptcy or civil war before these plans are modified to match reality. The histories to study are Detroit and Nixon’s killing what was left of the gold standard. The collapse of Japan and Illinois are the current events to follow."

MathGeek92 02-05-2016 05:32 PM

Quote:

Originally Posted by campbell (Post 8407775)
I'm sorry to be selfish (no, I'm not), but I'm thinking about the updates we'll have to make on the NAIC Economic Scenario Generator.

It was bad enough when we didn't anticipate a zero interest rate policy and had to adjust all the code.

Now I have to think whether the model will at all accommodate negative interest rates with simple code changes, or if we have to entirely redo

and not even just negative short rates, but can a negative UST out 5 years be accomodated with the model. it could happen for sure. If the deflation really starts to take hold and the Fed ramps up a NIRP, you will see the UST plummet across the board

Colymbosathon ecplecticos 02-06-2016 10:20 AM

How exactly would the coupons work on a 5-year negative interest rate Treasury.

Would they all be issued as discount instruments? If so, how exactly would *that* work?

d123454321 02-07-2016 10:03 PM

Unlikely US faces that sort of deflation. Every country cited there has negative population demographics. US has 0.5-1% annual population growth expectations, not close to negative. Very hard to have negative GDP + inflation when you had population growth like that. On the other hand Germany is expected to see population declines over next decades. Japan's is severe---they DO have legitimate deflation concerns.

MathGeek92 02-08-2016 09:28 AM

Quote:

Originally Posted by Colymbosathon ecplecticos (Post 8409082)
How exactly would the coupons work on a 5-year negative interest rate Treasury.

Would they all be issued as discount instruments? If so, how exactly would *that* work?

they would issue a zero coupon at a premium


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