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  #101  
Old 10-04-2016, 12:09 PM
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Quote:
Originally Posted by Dismal Science View Post
Who is buying bonds with negative yields?
banks

businesses/people who expect deflation

businesses who must buy assets and cant hold stacks of physical 100 Euro notes
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  #102  
Old 10-04-2016, 12:52 PM
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Funny stuff right here... can buy foreign debt to influence exchange rates but can if it is simply part of monetary policy. I assume all central banks use similarly strained logic as they increase the assets that they deem worthy of purchase.

"During a visit to China for a Group of 20 meeting on Sept. 5, Abe said such purchases would be illegal under the Bank of Japan Law, if they were meant as a form of currency intervention. BOJ Governor Haruhiko Kuroda said on Sept. 21 that Japanese law put the Ministry of Finance in charge of foreign-exchange transactions aimed at stabilizing the market."

"akahara was an intellectual father of the BOJís first attempt at quantitative easing in 2001. As a board member that year he proposed buying foreign bonds. While he was defeated by an 8-1 vote, minutes of the meeting show that four other members showed some sympathy toward his idea.

The BOJ should buy the same amount of such securities on a regular basis so that itís not seen reacting to specific moves in the foreign-exchange market, but using it for monetary policy, according to Nakahara."
http://www.bloomberg.com/news/articl...-kill-off-idea
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  #103  
Old 10-06-2016, 04:32 PM
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INSURANCE AND PENSIONS

https://www.theguardian.com/business...-pension-funds

Quote:
Pension funds and insurers at risk from low interest rates, says IMF
Global fiscal health check urges regulators to take swift action to secure balance sheets and identify funding gaps


Insurance companies and pension funds are at risk of becoming insolvent if ultra-low interest rates persist for a prolonged period, the International Monetary Fund has warned.

After almost eight years in which central banks have kept borrowing costs at record lows in an attempt to boost growth, the IMF said an over-reliance on monetary policy could have unwanted side-effects.

......
“The solvency of many life insurance companies and pension funds is threatened by a prolonged period of low interest rates,” the IMF said in its global financial stability report (GFSR).

“Low interest rates add to the legacy challenges facing many insurance companies and pension funds, along with those from ageing populations and low or volatile asset returns. Heightened concern over these important long-term saving and investment institutions could encourage even greater saving, adding to financial and economic stagnation pressures.”

The GFSR said regulators and supervisors needed to take prompt action to sustain the strength of insurance company and pension fund balance sheets, including identifying risks of insolvency and funding gaps. “Many pension funds face funding gaps, where the present value of future liabilities exceeds the market value of their assets,” the IMF said.
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  #104  
Old 10-09-2016, 02:38 PM
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GERMANY

https://www.ft.com/content/d99bdc50-...d%2F%2Fproduct

Quote:
Germany’s savings banks may have to pass negative interest rates on to private customers, the sector’s top banker has warned, in the latest sign of the strains caused by the European Central Bank’s ultra-loose monetary policy.

In an attempt to inject life into the eurozone’s economy, the central bank has cut rates to historic lows, and even pushed its deposit rate into negative territory — meaning that it effectively charges banks for parking excess reserves with it. Most German banks have started to pass on this levy on to big corporate clients. But with the exception of two tiny co-operative lenders in Thuringia and Gmund am Tegernsee, passing the levy on to private customers has remained taboo.

Given their focus on saving, Germany’s savings banks have been particularly opposed to the idea of charging private clients for their deposits. But in an interview with the FT, Georg Fahrenschon, head of the German Savings Banks Association, conceded that they might not be able to avoid doing so indefinitely.

.....
Martin Hellmich, a professor at the Frankfurt School of Finance and Management, said that if interest rates remain unchanged, then negative rates for private customers “will definitely come” in Germany.

“Some banks are already looking to close out their relationships with unprofitable customers to get rid of their deposits,” he said. “Banks that can’t do this will have to take other steps, such as passing on negative rates, including, step by step, to smaller customers.”

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  #105  
Old 10-09-2016, 03:02 PM
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Does pushing on a string not mean anything to these Central Bankers?
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  #106  
Old 11-15-2016, 07:44 PM
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PENSIONS

LOW INTEREST RATES

http://www.wsj.com/articles/era-of-l...rld-1479067408

Quote:
Era of Low Interest Rates Hammers Millions of Pensions Around World
Central-bank moves pull down returns for government-run funds, making it difficult to meet mounting obligations to workers and retirees

Central bankers lowered interest rates to near zero or below to try to revive their gasping economies. In the process, though, they have put in jeopardy the pensions of more than 100 million government workers and retirees around the globe.

.....
Managers handling trillions of dollars in government-run pension funds never expected rates to stay this low for so long. Now, the world is starved for the safe, profitable bonds that pension funds have long needed to survive. That has pulled down investment returns and made it difficult for funds to meet mounting obligations to workers and retirees who are drawing government pensions.

As low interest rates suppress investment gains in the pension plans, it generally means one thing: Standards of living for workers and retirees are decreasing, not increasing.

“Unless ordinary people have money in their pockets, they don’t spend,” the 70-year-old Mr. Kobayashi said during a recent protest of benefit cuts in downtown Tokyo. “Higher interest rates would mean there’d be more money at our disposal, even if slightly.”

The low rates exacerbate cash problems already bedeviling the world’s pension funds. Decades of underfunding, benefit overpromises, government austerity measures and two recessions have left many retirement systems with deep funding holes. A wave of retirees world-wide is leaving fewer active workers left to contribute. The 60-and-older demographic is expected to roughly double between now and 2050, according to the United Nations.
....
The problem is that investment-grade bonds that once churned out 7.5% a year are now barely yielding anything. Global pensions on average have roughly 30% of their money in bonds.

Low rates helped pull down assets of the world’s 300 largest pension funds by $530 billion in 2015, the first decline since the financial crisis, according to a recent Pensions & Investments and Willis Towers Watson report. Funding gaps for the two biggest funds in Europe and the U.S. have ballooned by $300 billion since 2008, according to a Wall Street Journal analysis.

Few parts of Europe are feeling the pension pain more acutely than the Netherlands, home to 17 million people and part of the eurozone, which introduced negative rates in 2014. Unlike countries such as France and Italy, where pensions are an annual budget item, the Netherlands has several large plans that stockpile assets and invest them. The goal is for profits to grow faster than retiree obligations, allowing the pension to become financially self-sufficient and shrink as an expense to lawmakers.

ABP currently holds 90.7 cents for every euro of obligations, a ratio that would be welcome in other corners of the world. But Dutch regulators demand pension assets exceed liabilities, meaning more cash is required than actually needed.

This spring, ABP officials had to provide government regulators a rescue plan after years of worsening finances. ABP’s members, representing one in six people in the Netherlands, haven’t seen their pension checks increase in a decade. ABP officials have warned payments may be cut 1% next year.

“People are angry, not because pensions are low, but because we failed to deliver what we promised them,” said Gerard Riemen, managing director of the Pensioenfederatie, a federation of 260 Dutch pension funds managing a total of one trillion euros.

Benefit cuts have become such a divisive issue that one party, 50PLUS, plans for parliamentary-election campaigns early next year that demand the end of “pension robbery.”

......
The Japanese government has turned to its $1.3 trillion Government Pension Investment Fund for cash injections six of the past seven years. That fund, the largest of its kind in the world, manages reserves for Japan’s public-pension system and seeks to earn returns that outpace inflation. The more it earns, the more it can shore up the government’s pension system.

In February, Japanese central bankers adopted negative interest rates for the first time on some excess reserves held at the central bank so commercial banks would boost lending. The pension-investment fund raised a political ruckus in August when it said it lost about •5.2 trillion ($49 billion) in the space of three months, the result of a foray into volatile global assets as it tried to escape low rates at home.

The fund’s target holdings of low-yielding Japanese bonds were cut to 35% of assets, from 60% two years ago, and it has added heaps of foreign and domestic stocks. It is now considering investing more in private equity.

......
Calpers investment chief Ted Eliopoulos’s strategy for the era of lower returns is to reduce costs and the complexity in the fund’s $300 billion portfolio. He and the board decided to pull out of hedge funds, shop major chunks of Calpers’ real-estate and forestry portfolios and halve the number of external money managers by 2020.

“Calpers isn’t taking a passive approach to the anticipated lower return rates,” fund spokeswoman Megan White said. “We continue to reassess our strategies to improve performance.”

Yet the Sacramento-based plan still has just 68% of the money needed to meet future retirement obligations. That means cash-strapped cities and counties that make annual payments to Calpers could be forced to pay more.

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  #107  
Old 01-31-2017, 09:30 AM
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http://www.businessinsider.com/the-b...changed-2017-1

Quote:
The Bank of Japan left monetary policy unchanged

The Bank of Japan (BoJ) left monetary policy unchanged at the conclusion of its January meeting, a decision that was almost unilaterally expected by financial markets.

Voting 7-2, the bank decided to retain its quantitative and qualitative monetary easing (QQE) with yield curve control program, keeping interest rates unchanged at 0.1% while pledging to purchase Japanese government bonds (JGB) so that 10-year JGB yields will remain at around zero percent.

It said that it will conduct JGB purchases at an annual pace of around 80 trillion yen with the aim “to achieve the target level of the long-term interest rate specified by the guideline”, in this case 0%.

The bank also left its annual purchases of exchange traded funds, Japan real estate investment trusts and corporate paper and bonds unchanged at about 6 trillion yen, 90 billion yen and 5.4 trillion respectively.

As it has now done for several meetings, it pledged to continue with its QQE with yield curve control program for “as long as it is necessary” to achieve its inflation target of 2% “in a stable manner”.

The decision to leave monetary policy settings unchanged came despite an upgrade to the bank’s real GDP growth forecasts for the next two financial years, an outcome that was also widely expected by financial markets.

The BOJ now sees real GDP growth of 1.5% in the 2017 fiscal year, up from its previous forecast of 1.3% offered in November last year, with growth in the 2018 fiscal year now expected to come in at 1.1%, 20 basis more than it’s previous assessment.

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  #108  
Old 01-31-2017, 10:00 AM
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https://www.soa.org/Research/Researc...est-rates.aspx

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Research Studies–Proposal Requests

Negative Interest Rates And The Insurance Industry
BACKGROUND and PURPOSE
The current low interest rate environment has impacted many segments of the US economy even insurers. While research has been conducted on the consequences of a sustained low interest environment and a transition to higher interest rate environment on insurers i , there is little available on how insurers might react to a sustained negative interest rate environment. The purpose of this study is to create a resource for risk managers and others to enhance current practices in managing and mitigating the risk of a sustained low interest rate environment.

RESEARCH OBJECTIVE

The CAS/CIA/SOA Joint Risk Management Section Research Committee (JRMSRC) are seeking researchers to perform a study of the potential impact of a sustained negative interest rate environment on the insurance industry. The following are proposed topics that may be addressed:

Discuss the potential impact of negative interest rates on the insurance industry as a whole and the impact to policyholder behavior. Include both qualitative and quantitative analysis.
Examine its impact to specific insurance products.
Given the current sustained low interest rate environment, how are companies managing the potential risk of a sustained negative interest rates.
Discuss potential government and insurer actions as a result of the market dynamics. For example, will insurers look to the consumer to make up for the lost interest income?
Discuss potential opportunities for the insurance industry in a negative interest rate environment
What are the views on the floor of the market interest rate from an insurance industry perspective and non insurer perspective?
How will models need to be adjusted to reflect possible negative interest rates in light of business as usual and stress testing?
What distribution for low/negative interest rates are being used in modeling and how can a distribution be determined in a negative/low interest rate environment?
At what interest rate level will there be a negative impact on insurers and available guarantee funds in case of insolvency?
How should negative interest rates be incorporated into the discounting of insurance losses?
Note that the above list is not meant to be exhaustive but merely examples of proposed topics that may be researched. The project description and expected deliverable(s) have been intentionally written to be brief to give researcher(s) sufficient latitude in the development of the proposals.
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  #109  
Old 08-28-2017, 05:38 PM
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was reading this for something else...

https://www.brookings.edu/blog/up-fr...ntent=55547485

and stopped when I saw this:



Quote:
The Bank of Japan however, has a significantly larger balance sheet relative to its economy than any other central bank. As a result of persistently low inflation (sometimes even deflation) in Japan since the 1990s, the BOJ was the first central bank in the world to experiment with quantitative easing back in 2001. When Haruhiko Kuroda became governor of the BOJ, he expanded the BOJ asset purchase program. As a result, the BOJ’s balance sheet is now over 94 percent of Japan’s GDP. The Fed’s is 23 percent of U.S. GDP.
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  #110  
Old 08-28-2017, 07:48 PM
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Would you rather that he had cast the Japanese economy into a depression, possibly sucking the whole world into one?

The political forum here at the AO is closed. Please don't reopen it here.
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