Interesting read on CBDC. Prepare to pay negative interest in a cashless society.
Posts tonen met het label Negative. Alle posts tonen
Posts tonen met het label Negative. Alle posts tonen
woensdag 9 juni 2021
dinsdag 22 december 2020
dinsdag 26 mei 2020
Gold Lease Rates Negative
Hi highly peculiar phenomenon has emerged. Gold lease rates are deeply negative now and this can mean several things.
Either gold has topped out, or interest rates should be going deeply into the negative territory shortly.
Gold tops usually occur when the 2 month lease rate is lower than the other lease rates and vice versa.
maandag 6 januari 2020
Regime change in gold and bonds
Something very interesting has happened recently. Gold has been going up while the amount of outstanding negative yielding bonds is actually decreasing.
This tells me that inflation is roaring back. We'll have to see how this evolves.
This tells me that inflation is roaring back. We'll have to see how this evolves.
vrijdag 12 juli 2019
Gold Vs. Negative Yielding Debt
This isn't a coincidence. The lower interest rates go, the higher the gold price will go.
We see a correlation between global negative yielding debt and gold.
We see a correlation between global negative yielding debt and gold.
vrijdag 5 juli 2019
How low can the 10 year German bond go?
With negative yielding bonds in Germany it is nice to read an article again that I posted in 2016.
=> https://seekingalpha.com/article/3979731-buying-negative-yielding-bonds
Germany's 10 year bond is now at -0.4% and goes down 0.5%/annum.
Who buys these bonds? The pension funds, the ECB, etc...
If they want to stay profitable on this trade, they need to buy as many bonds as possible to keep rates falling by 0.5%/annum.
But the limit is -10% as you can see on this chart. Once you hit -10% on 10 year government bonds, it's over with. You cannot make any profits at -10% bond yields anymore.
=> https://seekingalpha.com/article/3979731-buying-negative-yielding-bonds
Germany's 10 year bond is now at -0.4% and goes down 0.5%/annum.
Who buys these bonds? The pension funds, the ECB, etc...
If they want to stay profitable on this trade, they need to buy as many bonds as possible to keep rates falling by 0.5%/annum.
But the limit is -10% as you can see on this chart. Once you hit -10% on 10 year government bonds, it's over with. You cannot make any profits at -10% bond yields anymore.
dinsdag 2 juli 2019
ECB buying government bonds, pushing yields down
The ECB cannot keep buying government bonds. PSPP or public sector purchase program bonds. They are limited to 33% by the Court of Justice of the EU.
While doing this, the ECB is creating negative yielding debt.
Conclusion: with all of these negative yielding bonds, there is only one place left to go and that’s US bonds.
woensdag 19 juni 2019
German banks suffer from negative ECB deposit rate
This number tells it all.
The direct cost arising from the negative ECB deposit rate is about one-quarter of German bank profits.
The direct cost arising from the negative ECB deposit rate is about one-quarter of German bank profits.
woensdag 12 juni 2019
vrijdag 30 januari 2015
Negative Mortgage Rates in Denmark
I would be wary about negative interest rates on mortgages. Denmark might be giving you money at this stage when you borrow for a mortgage (see blue chart below of Danish mortgage rates). But there is a catch.
It seems too good to be true to borrow money and get paid for it by the bank, but consider this.
The thing is, when you borrow money and buy a house with it, the house price can collapse and the krone can strengthen through deflation. You might not need to repay the same amount back to your bank, but the money you repay is much more valuable later on in a deflationary environment. You could buy two houses with the same money when we enter a deflationary housing bust.
Housing in Denmark hasn't been doing so well lately.
Or the krone could strengthen against the euro and you (as a Danish person) will have to repay the loan in expensive krone.
I think that negative mortgage rates are a very strong indicator that we are going to see a major housing bubble pop soon. Once interest rates move up, everything collapses. And you will be sitting there repaying your debt.
It seems too good to be true to borrow money and get paid for it by the bank, but consider this.
The thing is, when you borrow money and buy a house with it, the house price can collapse and the krone can strengthen through deflation. You might not need to repay the same amount back to your bank, but the money you repay is much more valuable later on in a deflationary environment. You could buy two houses with the same money when we enter a deflationary housing bust.
Housing in Denmark hasn't been doing so well lately.
I think that negative mortgage rates are a very strong indicator that we are going to see a major housing bubble pop soon. Once interest rates move up, everything collapses. And you will be sitting there repaying your debt.
donderdag 18 december 2014
Negative Interest Rates: First ECB, now SNB
First the ECB lowered interest rates on deposits to -0.1% in June 2014. Now the SNB lowered interest rates on its deposits to -0.25%. Commercial bank deposits will follow soon and what would you do when you are charged for depositing money in your bank?
All of this is because the yield curves are flattening, and yields cannot be too close to each other, or we get a recession.
The effect of this drop in deposit rates should be that eventually investors remove their money from those banks and invest it in something else. Lending and spending will increase and the bubble becomes an even bigger bubble.
I do not need to tell you this is good for gold. In fact, denying the Swiss gold referendum is actually bullish for gold as the SNB can do whatever it wants now...
1) Yields go down due to lower interest rates.
2) CPI goes up through inflating the bubble.
All of this is because the yield curves are flattening, and yields cannot be too close to each other, or we get a recession.
The effect of this drop in deposit rates should be that eventually investors remove their money from those banks and invest it in something else. Lending and spending will increase and the bubble becomes an even bigger bubble.
I do not need to tell you this is good for gold. In fact, denying the Swiss gold referendum is actually bullish for gold as the SNB can do whatever it wants now...
1) Yields go down due to lower interest rates.
2) CPI goes up through inflating the bubble.
donderdag 5 juni 2014
dinsdag 27 mei 2014
The effect of ECB negative deposit rate
The recent news about the ECB imposing a negative deposit rate in June 2014 has spurred a new trend. The deposits at the European banks is seeing outflows.
Who would want to hold deposits with negative rates? They will of course take their money out and hunt for higher yielding assets.
See what happens to the deposits of the periphery in Europe on this chart:
Who would want to hold deposits with negative rates? They will of course take their money out and hunt for higher yielding assets.
See what happens to the deposits of the periphery in Europe on this chart:
woensdag 25 juli 2012
How low can negative yields on Swiss bonds go?
We have been seeing negative bond yields in Switzerland and Germany. Which is very odd if you ask me. The question begs to be asked: "How low can negative yields go?".
To give an answer to this you need to have an understanding of the price-yield curve of bonds. You can gain money if yields go lower (bond price rises), but you will lose money because you need to pay interest on the negative yield. So there should be an equilibrium point and as a scientist I very much want to find that equilibrium point.
There is a very nice online tool for the price-yield curve on this site: Wolfram: Price-Yield Bond Curve.
Inputs for this tool are:
1) Years to maturity (if you buy a new 2 year bond it has 2 years to maturity)
2) Annual Coupon payment (the amount of cash you get per annum)
3) Yield (the annual percentage cash you get on the principal)
I will analyze the 2 year Swiss government bonds in this article.
To give an answer to this you need to have an understanding of the price-yield curve of bonds. You can gain money if yields go lower (bond price rises), but you will lose money because you need to pay interest on the negative yield. So there should be an equilibrium point and as a scientist I very much want to find that equilibrium point.
There is a very nice online tool for the price-yield curve on this site: Wolfram: Price-Yield Bond Curve.
Inputs for this tool are:
1) Years to maturity (if you buy a new 2 year bond it has 2 years to maturity)
2) Annual Coupon payment (the amount of cash you get per annum)
3) Yield (the annual percentage cash you get on the principal)
I will analyze the 2 year Swiss government bonds in this article.
 |
| Chart 1: Swiss 2 year Government Bonds |
vrijdag 20 juli 2012
Belgium Gets Negative Borrowing Cost
And finally, Belgium also started to earn money by borrowing from others.
Investors actually pay us to put their money in our government bonds. The 3 month Belgium bond yield has gone negative on 19 July 2012. I thank you very much for this free money!
 |
| Chart 1: Belgium 3 Month Bond Yield |
zaterdag 7 juli 2012
Denmark: Negative Interest Rates
It's amazing that central banks actually started to send key interest rates below 0%.
Denmark just put the key interest rate to -0.2%.
Of course, they have no choice as the Danish krone is pegged to the euro.
 |
| Chart 1: EUR/DKK |
See Moneybags' video below:
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