20-Year Mortgages Hit Zero for First Time in Danish Rate History
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Re: 20-Year Mortgages Hit Zero for First Time in Danish Rate History
#2This seems like a good place to ask the question: how is it that we're seeing $15T of bonds worldwide trading with negative yields? [1]
TFA suggests this is due to structural factors--institutions that are required by law to own AA/AAA bonds. Is this some deficiency in the law or corporate governance, that cash in this circumstance isn't considered a substitute for a negative-yield bond? Its net present value would be greater. I can't imagine a scenario in which you would come out financially ahead from owning a negative yielding bond instead of cash.
[1] https://www.cnbc.com/2019/08/07/bizarro-bonds-negative-yield...
Re: 20-Year Mortgages Hit Zero for First Time in Danish Rate History
#3This seems like a good place to ask the question: how is it that we're seeing $15T of bonds worldwide trading with negative yields? [1] TFA suggests this is due to structural factors--institutions that are required by law to own AA/AAA bonds. Is this some deficiency in the law or corporate governance, that cash in this circumstance isn't considered a substitute for a negative-yield bond? Its net present value would b…
There is no risk free and cost free way to hold large amounts of cash. You can deposit it at a bank, but the bank could go under. You could keep paper cash in a vault but you’d have to pay to guard and maintain the vault. There’s no actual way to just “hold cash”.
Re: 20-Year Mortgages Hit Zero for First Time in Danish Rate History
#4This seems like a good place to ask the question: how is it that we're seeing $15T of bonds worldwide trading with negative yields? [1] TFA suggests this is due to structural factors--institutions that are required by law to own AA/AAA bonds. Is this some deficiency in the law or corporate governance, that cash in this circumstance isn't considered a substitute for a negative-yield bond? Its net present value would b…
There is no risk free and cost free way to hold large amounts of cash. You can deposit it at a bank, but the bank could go under. You could keep paper cash in a vault but you’d have to pay to guard and maintain the vault. There’s no actual way to just “hold cash”.
Why couldn't you just deposit it with the state's central bank, which is what commercial banks do? Their cash balances are just numbers in an electronic ledger. There isn't some vault with physical cash inside and armed guards on the outside.
Re: 20-Year Mortgages Hit Zero for First Time in Danish Rate History
#5Earlier quoted context omitted.
There is no risk free and cost free way to hold large amounts of cash. You can deposit it at a bank, but the bank could go under. You could keep paper cash in a vault but you’d have to pay to guard and maintain the vault. There’s no actual way to just “hold cash”.
Why couldn't you just deposit it with the state's central bank, which is what commercial banks do? Their cash balances are just numbers in an electronic ledger. There isn't some vault with physical cash inside and armed guards on the outside.
Because the central bank has negative interest? It's the reason commercial banks will refuse to store sufficiently large amounts of cash in a 0.00% checking account (even though they offer it for smaller amounts).
Re: 20-Year Mortgages Hit Zero for First Time in Danish Rate History
#6This seems like a good place to ask the question: how is it that we're seeing $15T of bonds worldwide trading with negative yields? [1] TFA suggests this is due to structural factors--institutions that are required by law to own AA/AAA bonds. Is this some deficiency in the law or corporate governance, that cash in this circumstance isn't considered a substitute for a negative-yield bond? Its net present value would b…
Great question.
Not sure I have an 'answer' but think it has something to do with the demand for money today vs the demand for money tomorrow.
Lots of the world's money is being held in the hands of those with...a lot of money.
Those people tend not to need money to spend it, and are looking for places to park it. Meaning there is a large supply of money today.
Meanwhile, lots of people need money, but there are fewer and fewer places where money can go and get a 10%+ return, so the demand for money today isn't that hot.
If supply is up, and demand is down, the price goes...down.
The 'price' of money today vs money tomorrow is basically the interest rate. So lots of supply, not much demand, and the price has collapsed.
Now why demand and supply are in that position, that's another (harder) story, and one that I've yet to see a good synthesis of.
Re: 20-Year Mortgages Hit Zero for First Time in Danish Rate History
#7Earlier quoted context omitted.
Why couldn't you just deposit it with the state's central bank, which is what commercial banks do? Their cash balances are just numbers in an electronic ledger. There isn't some vault with physical cash inside and armed guards on the outside.
Because the central bank has negative interest? It's the reason commercial banks will refuse to store sufficiently large amounts of cash in a 0.00% checking account (even though they offer it for smaller amounts).
Hmm FED rate is NOT negative?
Re: 20-Year Mortgages Hit Zero for First Time in Danish Rate History
#8Why would people not buy extra properties with these mortgages “just in case”?
Especially the 10 year one seems low risk and worst case you have a property after 10 years?
Re: 20-Year Mortgages Hit Zero for First Time in Danish Rate History
#9[deleted]
Re: 20-Year Mortgages Hit Zero for First Time in Danish Rate History
#10This seems like a good place to ask the question: how is it that we're seeing $15T of bonds worldwide trading with negative yields? [1] TFA suggests this is due to structural factors--institutions that are required by law to own AA/AAA bonds. Is this some deficiency in the law or corporate governance, that cash in this circumstance isn't considered a substitute for a negative-yield bond? Its net present value would b…
There is no risk free and cost free way to hold large amounts of cash. You can deposit it at a bank, but the bank could go under. You could keep paper cash in a vault but you’d have to pay to guard and maintain the vault. There’s no actual way to just “hold cash”.
It seems like this applies to any sort of counterparty risk, though - if you buy a bond with negative interest rates, there is no guarantee that they will pay it back, or that there will even be an organization to pay it back. In fact, with negative interest rates, there's an incentive to borrow as much as you can, just let it compound, and never pay back the money.
...come to think of it, this explains a lot about today's perma-bubble world.