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Foreign interest in Aussie debt peaks; The great capital flight begins
Topic Started: 25 Sep 2015, 10:25 AM (7,403 Views)
Rastus2
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Andrew Judd
26 Sep 2015, 02:43 PM
Stringberg is correct. Selling treasuries to another public sector buyer cannot have a big impact on the number of dollars in circulation.



His claim was " Foreigners selling their bonds on the secondary market makes no difference to the supply and demand for AUD regardless of residency of the participants."

I suspect if China deckded to sell large amounts of AU bonds, t would cause an impact.. why do you feel his claim ks right ?
Edited by Rastus2, 26 Sep 2015, 02:53 PM.
Shadow - Defrauded his Bank ? 2015 I have 9 different loans and my bank had no idea which ones were personal and which were investment. They had half of them classed incorrectly. When this change came in they asked me to tell them if any personal loans were incorrectly classed as investment, which I did, and they switched them to personal for the lower rate. They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)
Shadow - 2008 Sydney Median House Price 1.25M by 2014-2015

Shadow : I think this boom has already begun in several cities. My prediction :
Peak of boom: 2014-2015. Sydney Median Price: $1,250,000 Bottom of bust: 2017-2018. Sydney Median Price: $1,100,000

Shadow's Original 2010 House Boom and Crash prediction http://s836.photobucket.com/user/rastus22/media/shady-orig-2010-chart.png.html?sort=3&o=0

Shadow's attempt to edit his 2010 chart in 2015 and replace it with one that does not show a crash in 2013 http://s836.photobucket.com/user/rastus22/media/Screen%20Shot%202015-06-06%20at%207.12.52%20pm_1.png.html
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Sydneyite
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John Frum
26 Sep 2015, 01:26 PM
So what? Budget projections at the moment indicate a lot more money needs to be borrowed in the near future to keep on paying government contractors and staff.

A loss of foreign appetite for australian government debt will require yields to go higher on new issues no matter what jiggery pokery the RBA attempts, sending prices on the secondary market crashing and encouraging further selling.
Currently on both the secondary bond market and on the futures markets bond yields are falling / face value of bonds are rising. This doesn't really fit in with your theory now does it? I mean especially the futures - if people in the market believed that what you are saying is likely to happen, the the futures yields would be *rising* now already - especially for the further dated expires, as opposed to falling, as all the banks and o/s investors rushed to hedge their positions against your projected outcome.

I think you have an over-simplified view of the mechanics of the government bond market - suggest digging up some threads on this by b_b. Essentially no foreign money is needed to keep the bond market liquid, the action of the government spending creates the ESA reserves required for the banks to bid on all the new bonds that are issued, always. Which they want to do because it is less desirable to be holding excess ESA funds vs government securities. So foreign investors participating or not in future bond issuance is neither here nor there with respect to what drives the yields higher or lower.

For Aussie property bears, "denial", is not just a long river in North Africa.....
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newjez
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Strindberg
26 Sep 2015, 09:56 AM
The RBA actually began an interest rate cut series on 7 February 2001 when the Australian dollar was US 55cents, far below its current level and followed it with five more cuts. They were not deterred then by loony internet calls that they had no fire power.

Loki's allusion to foreign selling of gov bonds is not supported by John's opening article which specifically states that foreigners are not selling, and anyway surplus AUD (with effect on ex rates) could only arise from such a process if the sellers could sell back to the RBA/Treasury - which they cannot do. Foreigners selling their bonds on the secondary market makes no difference to the supply and demand for AUD regardless of residency of the participants.
Not really what I asked, but thanks


Posted Image


Posted Image

What I was interested in was how long after the last interest rate the aud fell for? Difficult to judge, as you are measuring several dynamic values, but maybe that in itself is the answer? Does the rba need to lower rates to make the aud fall? At least against the usd and GBP?
Edited by newjez, 26 Sep 2015, 03:01 PM.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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Sydneyite
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Rastus2
26 Sep 2015, 02:53 PM
His claim was " Foreigners selling their bonds on the secondary market makes no difference to the supply and demand for AUD regardless of residency of the participants."

I suspect if China deckded to sell large amounts of AU bonds, t would cause an impact.. why do you feel his claim ks right ?
How do you see it working?

China sells a whole heap of AU governments bonds, in return for which they receive AUD. They either keep the AUD (deposit it in an ADI) making those AUDs just as available to the economy in general as they were before - just the ownership of them changed. or they go on to sell the AUD in exchange for some other foreign currency, in which case the ownership of the AUDs simply changes again - but they still exist and are still present somewhere in the AUD based banking system and economy.

The impacts would have more to do with potential short term drop in bond prices as they sold I guess, plus downward pressure on the AUD against whichever foreign currency they exchanged to in that scenario as well. However unless both these actions were permanent / ongoing (which they would not be), these effects will only be transitory.
Edited by Sydneyite, 26 Sep 2015, 03:01 PM.
For Aussie property bears, "denial", is not just a long river in North Africa.....
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newjez
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Guest
26 Sep 2015, 11:06 AM
Might be time for all those UK expats to cash out of Aussie realestate before prices and the dollar fall to far and move back into the pound. Some probably now wishing they had done it a few months ago.

Big numbers at auction today, a new record for building completions coming onto the market next month.

Im a bit dissapointed by the banks, and was hoping this building boom and prices would go for a while yet, instead they have literally cut investors off at the knees by increasing required deposit to 20%, and as if that was not enough, they have also increased interest rates for them. I never saw either of these coming, but then again I never saw the leverage of superfunds coming either.

The mantra for the last number of decades has been to increase debt levels and therefore prices by increasing lvrs. Yet ALL of a sudden we have a complete reversal.

With interest rates cuts now being about the only weapon of choice left as they have NO other answers left, wont be long before a cut. 0.5% in one go as desperation hits overdrive. Who knows, might get a cut as soon as next week. GST rise wont be far behind.




That boat has sailed and is on the distant horizon, except maybe if you live in Sydney.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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Loki
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peter fraser
25 Sep 2015, 11:30 PM
Exactly, what would you know.
:lol Thanks.
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A falling AUD does push up the cost of imported goods but it creates jobs here.
How does that help people who already have a job and the cost of living is rising?A falling AUD pushes up the cost of every good, imported or domestically produced, because every good and it's distribution is sensitive to the price of oil. If oil continues to fall to $20 a barrel,parts of the US economy will be in very deep doo doo. If it stabilises at $50 a barrel and the AUD continues to fall, the price of everything will continue to rise.
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Not my problem or yours.
I was thinking of the economy as a whole. I forget that some people don't look any further than their own bank balance.
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Did you deliberately confuse money printing with interest rate adjustments, or are you are confused about the issue in your haste to impress yourself with your own clever wit.
Do you even understand how bond, bill or commercial paper markets work? Or are you one of those who think the overnight cash rate sets the convexity of the entire curve?


“Talk sense to a fool and he calls you foolish.” - Euripides
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John Frum
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Mike
26 Sep 2015, 02:02 PM


Canada has the double whammy, collapsing mining industry and collapsing oil industry.
They're both part of the same picture - weakening Chinese demand for commodities.

Lower oil prices reducing input costs for businesses mean nothing when there's no demand for those businesses to fulfill.
"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness.
"Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
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newjez
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Sydneyite
26 Sep 2015, 03:00 PM
How do you see it working?

China sells a whole heap of AU governments bonds, in return for which they receive AUD. They either keep the AUD (deposit it in an ADI) making those AUDs just as available to the economy in general as they were before - just the ownership of them changed. or they go on to sell the AUD in exchange for some other foreign currency, in which case the ownership of the AUDs simply changes again - but they still exist and are still present somewhere in the AUD based banking system and economy.

The impacts would have more to do with potential short term drop in bond prices as they sold I guess, plus downward pressure on the AUD against whichever foreign currency they exchanged to in that scenario as well. However unless both these actions were permanent / ongoing (which they would not be), these effects will only be transitory.
Why wouldn't they be ongoing?
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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Andrew Judd
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Rastus2
26 Sep 2015, 02:53 PM



His claim was " Foreigners selling their bonds on the secondary market makes no difference to the supply and demand for AUD regardless of residency of the participants."

I suspect if China deckded to sell large amounts of AU bonds, t would cause an impact.. why do you feel his claim ks right ?
If you select a quote you can create pretty well any meaning you want

Strindberg said

surplus AUD (with effect on ex rates) could only arise from such a process if the sellers could sell back to the RBA/Treasury - which they cannot do. Foreigners selling their bonds on the secondary market makes no difference to the supply and demand for AUD regardless of residency of the participants.
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Loki
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Strindberg
26 Sep 2015, 09:56 AM
Loki's allusion to foreign selling of gov bonds is not supported by John's opening article which specifically states that foreigners are not selling, and anyway surplus AUD (with effect on ex rates) could only arise from such a process if the sellers could sell back to the RBA/Treasury - which they cannot do.

Unless the RBA launches some kind of QE. If that were not the case, selling them on the secondary market would drive prices down and yields up, regardless of what is done with the proceeds.
Quote:
 
Foreigners selling their bonds on the secondary market makes no difference to the supply and demand for AUD regardless of residency of the participants.
I never said it did. I said if foreigners sell their bonds and then sell the proceeds of selling those bonds (AUD), it will put downward pressure on the exchange rate.

This is a well known phenomenon known as "unwinding a carry trade."

herbie
25 Sep 2015, 10:59 PM
Seems to me that I'm a numptie 'n realise it. While you're a numptie 'n don't - For both of which realisations I continue to be grateful ... :)
Apology accepted.
Edited by Loki, 26 Sep 2015, 03:17 PM.


“Talk sense to a fool and he calls you foolish.” - Euripides
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