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  #91  
Old 07-20-2016, 03:23 PM
lulzEMH lulzEMH is offline
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Quote:
Originally Posted by MathGeek92 View Post
nice summary .. I'm not a huge zerohedge fan, but the way the ECB released the data, someone had to sift through it all and they did a good job breaking it all down

http://www.zerohedge.com/news/2016-0...ost-everything
Seems like eventually the CB's own some crazy amount of the worlds financial assets. Based on gov yields, is it reasonable to assume that assets they are targeting are more overpriced than assets they aren't yet targeting for purchase?

Below is a good video about the central banks and the growth of their balance sheets. It's really well done.

https://www.youtube.com/watch?v=CLQsT9BPHpg
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  #92  
Old 07-21-2016, 11:25 AM
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I was seeing posts earlier in the thread referencing that interest rates could go into the negative in the US as well at some point.

My question is: if I'm looking to buy a condo in the next year or so - is this the time to do so? not to thread jack, but say we experience this deflation, what does that mean for someone like me trying to buy a place and start saving for retirement?
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  #93  
Old 08-02-2016, 07:35 AM
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I was thinking some about the CB balance sheets. What allows them to manage a debasement in currency the best? Like if they had a gold backed currency couldn't they devalue to some level and then use their gold supplies to defend the new currency? Likewise, if they owned a bunch of equities, land..etc. they could use it in a similar fashion as gold in defending their currencies as it largely maintains its value in a devaluation (easily could argue equitie >> gold due to productive value). But CB's have been most active in buying up gov debt, granted it has a potential draw on future tax revenue but isn't it a much worse asset to use in defending a debased currency (especially in a fiscally impaired gov balance sheet scenario)?

Buying up highly rated Corporate bonds seems to fall somewhere between a stable assets like equities and impaired gov debt but seems like a poor asset to be loaded on if hellicopter occurs.

I guess I kind of look to Argentina as an example of hellicopter money/devaluation/default as an example. Their Merval index has went up at an annualized rate of about 30% since they depegged in 2002 (their currency has went from 1 to 1 to 15 to 1, one or two gov debt restructuring). I believe equities, land, metals, foreign currencies were the places to be. But in a world where most central banks seem to be ramping up QE as they approach their end game, and appear increasingly willing to balloon their balance sheet monetizing gov debt I don't think foreign currencies would be in the strong asset class.

As I think about this more it seems like calls on these assets might be a good hedge to some sort of debasement. Seems like CB's would be wise to increase their purchase of these prior to going full hellicoptor, and when hellicopter happens they should hold up relatively well relative to other assets. The cheapest option I could think of, easily available to retail investors was calls on an equity index, using an index limits the implied vol (relative to gold or individual stocks), low interest rates also keeps the cost down. Probably just lighting money on fire (have a penchant for that over the past few years). This seems to play out in Japan much faster as they are well ahead on the path compared to USA and just announced another increase in their ETF purchases.

Last edited by lulzEMH; 08-02-2016 at 07:40 AM..
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  #94  
Old 08-09-2016, 02:37 PM
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http://www.wsj.com/articles/are-nega...nce-1470677642

Quote:
Are Negative Rates Backfiring? Here’s Some Early Evidence
Economists worry that people and businesses are saving more, instead of spending

.....

Recent economic data show consumers are saving more in Germany and Japan, and in Denmark, Switzerland and Sweden, three non-eurozone countries with negative rates, savings are at their highest since 1995, the year the Organization for Economic Cooperation and Development started collecting data on those countries. Companies in Europe, the Middle East, Africa and Japan also are holding on to more cash.

Economists point to a variety of other possible factors confounding central-bank policy: Low inflation has left consumers with more money to sock away; aging populations are naturally more inclined to save; central banks themselves may have failed to properly explain their actions.

But there is a growing suspicion that part of problem may be negative rates themselves. Some economists and bankers contend that negative rates communicate fear over the growth outlook and the central bank’s ability to manage it.

......
The U.S. Federal Reserve’s next move is likely to raise rates, but Chairwoman Janet Yellen has said negative rates could find a place in the Fed’s armory in any future crisis.

The Bank of England, shaken by June’s surprise vote to leave the European Union, cut interest rates to their lowest in its 322-year history last week but said it was reluctant to go negative. BOE Gov. Mark Carney said he is “not a fan” of a policy that has negative consequences for savers and the financial system. European banks say their profitability has been hit hard by low rates.

Negative Interest Rates: How Do They Work?
0:00 / 0:00
Central banks across the globe are trying a radical approach to boost economic growth: negative interest rates. But what are negative rates and will they work? Image: Adele Morgan/The Wall Street Journal (Originally published April 14, 2016)
Some central bankers say it is too early to judge negative rates. “The effect won’t be seen all at once, but it will gradually become clear,” said Bank of Japan Gov. Haruhiko Kuroda in a June news conference.

.....
Other central-bank executives concede negative rates may push some to save. Yves Mersch, a member of the ECB’s executive board, said in June that it is possible “households are hoarding even more” because they need to save more to build up the same amount of wealth over the same time span.

Household spending as percentage of gross domestic product has fallen slightly in Germany to 54% last year, from 55.4% in 2013, according to OECD data. It also has fallen in Sweden, and is relatively flat in Denmark and Switzerland.

Interest payments on savings accounts in the eurozone are at the lowest levels since 2000, according to ECB data. In the early 1990s, it took nine years for a German saver to double his or her capital as interest income piled up, according to Hans Joachim Reinke, chief executive of Frankfurt-based Union Investment. Now, savers like Ms. Hofmann would have to wait 500 years for that to happen.

Negative rates have also hit pension payouts, giving older savers another reason to squirrel away more cash.

Pension funds and pensioners typically invest in government bonds in a quest for reliable income. That income has never been smaller. About $12 trillion worth of bonds currently have negative yields, according to Bank of America Merrill Lynch European credit-strategy research, compared with almost none two years ago.


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  #95  
Old 08-22-2016, 04:19 PM
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via Mish:
https://mishtalk.com/2016/08/20/rbs-...erest-roundup/

ROYAL BANK OF SCOTLAND

http://www.eleconomista.es/banca-fin...orrientes.html

google translate version:

Quote:
Royal Bank of Scotland (RBS), an entity in which the British Government controls a 72.6% stake, will begin charging its institutional customers for their deposits in the bank in order to cope with the last rate reduction interest held by the Bank of England (BoE) on 4 August. In addition, two other German companies will do the same to cushion the negative rates implemented by the ECB.

According to the newspaper Financial Times, RBS has sent a letter to certain corporate customers of its investment banking division in which indicates that negative interest rates will apply from next Monday.

The negative interest rates affect customers operating in futures and options and therefore maintain deposits as collateral, said the British head a knowledgeable banker plans of the entity.

In the letter, RBS argues that so far have remained at 0% deposit rate, but the time has come where they can not "hold" this level, so begin applying negative interest rates.


https://www.ft.com/content/90ce80bc-...#axzz4HGY7CZmI

Quote:
RBS to start charging large UK clients to hold cash
Some investment banking customers will be hit with negative interest rates from Monday

Royal Bank of Scotland is to charge some large corporate customers for holding their cash, the first sign the Bank of England’s decision to cut rates to historic lows is forcing lenders to collect negative interest from deposit holders.

The state-backed bank has written to certain financial institutions in its investment banking division to warn them it will apply negative interest rates from Monday, according to a letter seen by the Financial Times.

Although the RBS move affects only a subset of business customers, some lenders in Europe, where both the European Central Bank and the Swiss National Bank have kept interest rates below zero for months, have been charging a wider array of customers to hold their deposits.

Mark Carney, the Bank of England governor, who announced the cut to 0.25 per cent earlier this month, has said he wants to avoid the ECB and Swiss precedents. But RBS’s decision is the first for a UK lender and analysts warned it could spur other financial institutions to follow their European counterparts.

“What you’re seeing is there have been a few banks in Germany and a couple in Switzerland which have started to charge for deposits; importantly, it’s to corporate customers, or very wealthy people,” said Andrew Lowe, an analyst at Berenberg.

“You are likely to see the UK banks follow suit, in particular if rates fall further,” he added. “Everything that applies to Europe applies to UK banks as well.”

GERMANY

http://www.reuters.com/article/postb...-idUSL8N1B01CA

Quote:
German Postbank scraps free accounts for millions of customers

Aug 19 Germany's Postbank, a unit of Deutsche Bank, is to scrap free current accounts for millions of customers in an effort to offset the burden of the European Central Bank's negative interest rates.

"The market environment, especially low interest rates, make it ever harder to earn money from current accounts," Postbank board member Susanne Kloess said in a statement.

From Nov. 1 customers will be charged 3.90 euros ($4.41) a month unless they have monthly inflows of 3,000 euros or more, in which case they will still have cost-free access to a premium giro account, Postbank said.

The move underscores the pressure German banks are facing to find fresh sources of revenue since the ECB's money-printing policy slashed the margin between short-term borrowing and long-term lending. Banks previously used that margin to subsidise other products, such as free giro accounts for customers.

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  #96  
Old 09-07-2016, 04:21 PM
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JAPAN

https://www.ft.com/content/8aedd988-...#axzz4JIoV28nh

Quote:
Bank of Japan vows to keep easing monetary policy
Kuroda’s pledge paves the way for further easing this month

Haruhiko Kuroda has vowed to keep easing monetary policy until inflation reaches 2 per cent, in a defiant speech dismissing the Bank of Japan’s critics.

Mr Kuroda, governor of the BoJ since 2013, claimed the central bank’s policies “have contributed significantly to the positive turnround in Japan’s economy” and said there was no chance of reducing the level of monetary accommodation.

His remarks pave the way for further easing in September, including the possibility of cutting interest rates from the current minus 0.1 per cent. They will eliminate market speculation that the BoJ could back away from aggressive policy.

“It is often argued that there is a limit to monetary easing but I do not share such a view,” Mr Kuroda told an audience in Tokyo. He said there was ample room for the BoJ to buy more government bonds, to cut interest rates further, or to buy other assets such as corporate bonds, equity and real estate funds.
......
Mr Kuroda launched a huge monetary stimulus in 2013, buying government bonds at a pace of 50tn year; in October 2014, he upped the pace to 80tn; then in January 2016 he cut interest rates to minus 0.1 per cent.

Yet despite the high level of monetary stimulus, the latest data show a 0.4 per cent fall in the consumer price index compared with a year ago, and a slowdown in inflation even excluding volatile food and energy prices.


Mr Kuroda argued the failure to hit 2 per cent inflation so far is because of three shocks: falling oil prices since summer 2014, weakness in demand after raising Japan’s consumption tax in April 2014, and a slowdown in emerging markets from summer 2015.
.....
The BoJ governor also sought to defend his “extremely powerful” negative interest rate policy, raising the chances of a further rate cut in September. The policy has come in for heavy criticism from Japanese banks and the public.

He said there had been no damage to the supply of bank credit so far, but the BoJ has to consider the long-term trade-off between a healthy financial system and a lower yield curve.

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  #97  
Old 09-08-2016, 04:14 PM
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https://www.brookings.edu/opinions/n...ntent=33974175

Quote:
Negative interest rates are counterproductive

......
Despite negative interest rates on deposits in many European banks, consumers have not ramped up their spending, as many economists would predict. In theory, when the returns on savings are zero or less, consumers should be spurred to save less and spend more. In addition, since negative interest rates are used by central banks to boost the rate of price inflation, consumers should theoretically spend more now before prices rise.

In fact, consumers have recently increased their savings and reduced their debts in Denmark, Sweden, and Switzerland. In Japan, consumers are also saving more. More generally, this summer, consumer savings hit their highest levels since 1995, when the Organization for Economic Cooperation and Development started collecting data on savings in advanced industrialized countries.

There are many possible explanations. Older workers, faced with very low investment returns, may have decided to save more for retirement. Younger workers without a big nest egg may be building up their own liquidity in fear of another financial crisis. Most importantly, some consumers have interpreted negative interest rates as a sign that their central bank is panicking, so they need to hunker down — and perhaps buy gold.

Thus, ironically, negative interest rates may be undermining the confidence of consumers in the economy — which is necessary for them to borrow and spend. For the year from Q2 2015 thru Q1 2016 (before the June vote for Brexit), Nielsen’s surveys show that consumer confidence has been generally declining in all four countries with negative interest rates.

Give the weakness of consumer demand, companies and banks continue to let cash pile up on their balance sheets. In March of 2016, the cash held by 75 of the biggest non-financial companies in Europe had increased almost 40 percent over the last 6 years. In the European Union, the vast majority of banks see no material impact on lending volumes as a result of negative interest rates, according to Deutsche Bank.

Some executives are concerned about the slowdown in China and emerging markets. Other executives have been taken aback by the strident anti-business rhetoric prevalent in political debates. In addition, with interest rates so low, many company executives feel pressured to increase cash dividends to their shareholders.

But research by MIT Professor Kothari and his colleagues demonstrates that interest rate cuts are generally a weak tool to promote business spending. Based on 60 years of data, he concluded that “moving the interest rate by one or two per cent does not generate a change in the investment behavior on the part of corporations.” Given these findings, central bankers should not expect lowering interest rates by one-quarter or one-half of 1 percent to trigger a boom in corporate borrowing or investing.

Rather, company executives tend to respond to a positive profit outlook and a stable environment for growth, according to Kothari. For example, the study found that a $1 increase in profits led to a 25 percent increase in investment the following quarter, and nearly $1 over the next five quarters.

In short, we have reached beyond the effective limits of interest rate cuts to promote economic growth. That now requires other governmental policies such as significant infrastructure investments and targeted tax incentives. But radical monetary measures like negative interest rates have taken the political heat off legislators to adopt needed fiscal policies.
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  #98  
Old 10-03-2016, 05:03 PM
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http://www.bloomberg.com/news/articl...itter-business

Quote:
Negative-Yielding Bonds Jump to Almost $12 Trillion
Holy crap

Quote:
World’s less-than-zero bonds, mostly sovereign, near June peak
France, Germany, Netherlands have biggest piles after Japan’s


The unprecedented worldwide surge in the market for bonds that are certain to lose money if held to maturity regained strength last month.

The total face value of negative-yielding corporate and sovereign debt in the Bloomberg Barclays Global Aggregate Index of investment-grade bonds jumped to $11.6 trillion as of Sept. 30, up 6.1 percent from a month earlier. That sum had fallen for two months in a row from June’s $11.9 trillion peak.

Demand for the safety of high-quality bonds pushed up the totals in all but two of the 13 countries with more than $100 billion in negative-yielding debt. Italy’s tally shrank by 9 percent to $361 million and Denmark’s expanded more than a third to $104 million.

Japan, where policy makers moved in last month to coax yields up, remains ground sub-zero with almost $6 trillion, about half of the global total. Western Europe accounts for 47 percent, the bulk from France, Germany, the Netherlands, Spain and Italy.
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  #99  
Old 10-03-2016, 06:45 PM
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Who is buying bonds with negative yields?
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  #100  
Old 10-03-2016, 06:48 PM
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Quote:
Originally Posted by Dismal Science View Post
Who is buying bonds with negative yields?
People who think it will go even lower? Huge buyers who attribute a small convenience value to using bonds, rather than trying to deal with large piles of cash. The gov't buying from itself.
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