Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

20-Year Mortgages Hit Zero for First Time in Danish Rate History

bloomberg.com

Post reply on HN
Print view View original

51–57 of 57 posts

Re: 20-Year Mortgages Hit Zero for First Time in Danish Rate History

#51

Post by runako »

nihonde wrote: post #50
throw0101a wrote: post #21

Earlier quoted context omitted.

> This 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] We've been on a 10 year run of growing economies after the Great Recession and stocks/equities have price-to-earning (P/E) ratios that are really high—as high as what they often were before other corrections and/or recessions: * https://www.macrotrends.net/2577/sp-500-pe-ratio-pric…

Wasn’t the question about cash versus bonds—not equities versus bonds? Honest question: What advantages do bonds with negative rates have over cash with low positive rates? Do bonds protect against inflation?

"Cash" in quantity usually doesn't mean literal dollar bills or euro notes. "Cash" typically means instruments like US Treasury bills or the bonds issued by other governments.

The negative rates are in essence what investors pay in order to hold their money in "cash."

Re: 20-Year Mortgages Hit Zero for First Time in Danish Rate History

#52

Post by fyfy18 »

jobigoud wrote: post #47
waynecochran wrote: post #35

Earlier quoted context omitted.

ELI5, how do banks make money if they don't charge interest?

Maybe they couple it with other services like the mortgage insurance or a life insurance or they request that your salary be credited to a checking account at their bank. Assuming they make money, could they then go sub zero?

With fractional reserve banking it is even better, as credit effectively creates money out of thin air. This increases the overall supply of money in an economy, so banks can make money from other sources when that money is spent (e.g. credit card processing fees).

The loans are considered assets of the bank, so still increases it's value. And if the loan ends up in an account on their books (there's not that many banks in Denmark), they can then loan out that money again minus the fraction they need to hold.

Re: 20-Year Mortgages Hit Zero for First Time in Danish Rate History

#53

Post by petre »

nostrademons wrote: post #12
xchaotic wrote: post #7

Earlier quoted context omitted.

Hmm FED rate is NOT negative?

Fed isn't but Japan and many European central banks are. Bank of Japan and ECB are both at -0.1%.

The ECB is more like at -0.4%. Outrageous.

https://www.ecb.europa.eu/stats/policy_and_exchange_rates/ke...

Re: 20-Year Mortgages Hit Zero for First Time in Danish Rate History

#55

Post by gridlockd »

vonmoltke wrote: post #48
gridlockd wrote: post #43

Earlier quoted context omitted.

> Banks in Europe are charging people a percentage to hold their money? The European Central Bank charges banks negative interest to hold their money for them, which is a reserve requirement. Those costs may be forwarded to customers (but 1% is not a realistic figure). Either way, you don't want to store your money at a bank beyond what is insured. > That's a bit of context that helps, since that is unheard of in the…

> The European Central Bank charges banks negative interest to hold their money for them, which is a reserve requirement. The ECB requires the reserve be deposited with them? There is no "vault cash" provision like the US?

Vault cash is possible, but that costs upkeep too. It does limit the central bank ability to go deeply negative though, which is one argument for going "cashless".

Re: 20-Year Mortgages Hit Zero for First Time in Danish Rate History

#56

Post by acchow »

xchaotic wrote: post #8

Why 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?

Need cash flow for mortgage payments.

Need down payment.

Price are inflated by increased demand due to zero interest rates. How much will they drop when they rise?

Re: 20-Year Mortgages Hit Zero for First Time in Danish Rate History

#57

Post by pbecotte »

thedudeabides5 wrote: post #6
yasp wrote: post #2

This 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 fewe…

Something I have thought privately for years is that lowering the "cost of money" is the best way to reduce inequality. It is beginning to look like we may find out as that cost keeps going lower.
Post reply on HN