Negative interest rates?

No.

Shiney likes the verbal joust too much and the other guy doesn't seem smart enough to know any better.

Just consider it noise. Thread pollution. Put them both on ignore if their tedium bothers you.
 
Hmmm, I thought I read somewhere that analysts were predicting that the RBNZ would get to sub-zero rates at some time. Didn't even get a rate cut.

NZD/USD spikes to 0.6900 after the RBNZ interest rate decision

  • The NZD/USD pair soared after the RBNZ interest rate decision.
  • The bank left interest rate and the large asset purchases program unchanged.
  • The members also voted to lower the cost of borrowing by providing more financing to banks.
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snip

The Committee reaffirmed that an FLP, a lower or negative OCR, purchases of foreign assets, and interest rate swaps remain under consideration.
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snip

Members noted that the banking system is on track to be operationally ready for negative interest rates by year end. The Committee agreed that it was prepared to lower the OCR to provide additional stimulus if required.
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https://invezz.com/news/2020/11/11/nzd-usd-spikes-to-0-6900-after-the-rbnz-interest-rate-decision/


The RBNZ is downbeat about the future, expecting downside risk to pose a greater threat than the potential for any welcome upside risk.

This video, at 12:08 they discuss negative rates. First a bit of theory ie it's supposed to be a disincentive against banks from holding cash settlement balances (the RBA has now set a 0% rate for Exchange Settlement balances, previously they'd lifted it to 0.1%), then what it's supposed to do ie reduce the rates for borrowers as banks used the cash settlement balances more aggressively and in the process benefit borrowers.

The RBNZ Chief Economist made it clear that depositors and mortgage holders won't face negative rates, at 14:07:

Don't worry you won't be forced to pay money to the bank to keep your money there likewise the bank won't be paying you to take out a mortgage.
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Number 47 said:
I thought if the government sells it's debt at a negative rate then it counts?
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When gov/reserve sells....

With Bonds, the Reserve sets the rate ie 1.5 billion 5 years @ .5% pa (paid monthly, quarterly, annually or maturity)-> rate is set by "government"

With Treasury notes, the Reserve states I need 1.5 billion for 6 months, what do you want in interest and it's basically a blind dutch auction, than the lowest bidders gets to lend the money to reserve. The interest is "paid" at redemption.

This time around one institution offered to pay the government (-0.1%) to lend them about 500 million, for the remaining billion the government ended up paying two lenders and overall interest rate was positive.

End of the day it could have been an expensive typo lol. We can't really blame the government for negative rates if someone wants to pay them to lend them money
 
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Number 47 said:
I thought if the government sells it's debt at a negative rate then it counts?
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Normally when people talk about negative rates they reference the central bank target rate (banking overnight lending rate).

But ill also be interested if OZ government bonds coupon rate go negative too.
 
An investor, likely to be offshore, has purchased at least $1 million worth of three-month treasury notes at a negative interest rate of -0.01 per cent.

The federal government's debt manager, the Australian Office of Financial Management, offered $1.5 billion worth of March 26 T-notes. The demand was so strong that the $1.5 billion offer was 5.47 times oversubscribed.

One investor took out a $500 million tranche of the offer, or about 37 per cent, at an interest rate of 0.015 per cent. The weighted average yield on the note was 0.0099 per cent.
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https://www.afr.com/policy/economy/...borrow-as-rates-turn-negative-20201210-p56mc8
 
It's supposed to be confusing, same as insurance and taxes. They are set up that way on purpose.
Theres always some fine print somewhere that you wont see!
 
mmm....shiney! said:
Banking on a strengthening AUD from what I've read.
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What i mean is why not just put keep the $1 million in deposit account for 3 month? Why take a small loss to have it as a T-Bill?

I can't get my head around the FX market. Granted i haven't spent much time studying it, i should ad it to my to do list.
Assuming it was related to a FX trade and not a fat finger.
 
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leo25 said:
What i mean is why not just put keep the $1 million in deposit account for 3 month? Why take a small loss to have it as a T-Bill?

I can't get my head around the FX market. Granted i haven't spent much time studying it, i should ad it to my to do list.
Assuming it was related to a FX trade and not a fat finger.
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For what ever reason, the lender must have had a banking/lending/trust covenant where they must hold X amount of Australian government issued debt.

It is very unlikely the covenant called for $1 million but rather a higher amount like (made up) 250 million but they realised they only had $249m and topped up. The rate these notes were priced 0.0099 per cent, it is fine margin in blind dutch auction, so if they were potentially facing a bigger fine/default/penalty for not holding the full X amount 0.01% is small price to pay to guarantee compliance.
 
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Ipv6Ready said:
For what ever reason, the lender must have had a banking/lending/trust covenant where they must hold X amount of Australian government issued debt.
.
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ok, so it most likely has to do with arbitrary compliance/ legal requirements.
 
leo25 said:
^ ok, so it has to do with compliance/ legal requirements.
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I am just saying it is potentially the most plausible theory, as to why an insititution will be offering to pay to lend money for particular asset.

End of the day it could have been somone who won the powerball last week and thought having thousand $1000 treasury notes was cool to wallpaper his bedroom.... not realising that there are no paper notes (in Australia) but just an account :) ...
 
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