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Foreign interest in Aussie debt peaks; The great capital flight begins
Topic Started: 25 Sep 2015, 10:25 AM (7,401 Views)
John Frum
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foxbat
27 Sep 2015, 11:44 AM

The dumb monkey will end up buying the property when it is at it's peak, the smart monkeys will then be sitting on a beach waiting, tick tock.
The smart monkeys appear to be making their way out of Sydney now.
Andrew Judd
27 Sep 2015, 12:31 AM
Selling large amounts of bonds is likely to push up the interest rates required to sell new bonds unless here are other forces driving them down

Exactly, this is what the QE forever crowd forget - the sole purpose of setting interest rates low and buying up securities is to counter the systemic risk in the market that's working to drive yields up. It's artificially masking investment risk in the hope that the economy will reach escape velocity and again be able to price yields solely on risk and inflation expectations.

This behaviour is all fine and dandy when every other economy that competes for global capital is engaged in this "race to the bottom". But once one of the major competitors reaches the bottom and begins their ascent with a rate hike, minor competitors like EMs and Australia can no longer apply this distortion, because there is now a competitor paying better returns on capital, with stable inflation expectations and less downside risk to their currency.

Therefore bond pricing for smaller economies like ours will come to be based less on central bank manipulations and more on percieved risk, and for Australia the risks are increasing every day - our weakening currency and stock market volatility are testament to that.
Edited by John Frum, 27 Sep 2015, 01:01 PM.
"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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Terry
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foxbat
27 Sep 2015, 11:44 AM
On house prices,
The people can not really be blamed for this.

What other "investment" can the average Joe make??


So the smart rich people say well "average Joe" when he has a little spare cash will invest in a house. What else can the simpleton do??

So the smart monkey buys what the simple monkey has to buy.

Now the games begin.

The dumb monkey will end up buying the property when it is at it's peak, the smart monkeys will then be sitting on a beach waiting, tick tock.

Have fun boys and girls.

Peter

https://www.youtube.com/watch?v=YedqV4Gl_us
In many respects, you're right. The suburbanites are effectively trapped in the world of "investment" and the property sector has geared itself well with all the political and institutional strategic and tactical moves. The world of equities is really off the radar for most and only considered through super. I'm not really sure about what % of the popn are active traders or investors, but I can't be bothered to research right now.

The only other options available are as follows:

1. Do nothing (actively discouraged by the status quo as it doesn't benefit the collective)

2. Invest in yourself (an option I only really see among younger, childless people. Many of whom end up overseas)
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createdby
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http://www.smh.com.au/business/markets/australian-bonds-a-buy-at-fidelity-worldwide-as-dollar-falls-20150927-gjw4uk.html

Australian bonds a 'buy' at Fidelity Worldwide as dollar falls

September 28, 2015 - 9:24AM

International investors' appetite for Australian bonds has waned as the local dollar tumbled. Fidelity Worldwide Investment has been sticking with its holdings and says it's time to consider buying.

"It could be the turning point," said Andrew Wells, the chief investment officer for fixed income at Fidelity Worldwide, which has $US290 billion in assets. "We do have big exposure in Australia. We have liked it for some time," he said in an interview last week in Singapore.

While official data show offshore bond buyers have cut the proportion of Aussie debt they own to the lowest level since 2009, the currency has dropped 20 per cent over the past year to a level that no longer seems "seriously misaligned" to the central bank. It bought US70.33¢ late on Friday in Sydney, and the median forecast in a Bloomberg survey of analysts is for it to be around US69¢ at the end of next year.

As well as currency stabilisation, the possibility of further easing from the Reserve Bank of Australia may also provide support for Aussie bonds.

While the RBA has signalled its reluctance to cut, the swaps market is pricing in a 57 per cent chance of a reduction by the end of March. By contrast, the U.S. Federal Reserve is preparing to raise interest rates for the first time in almost a decade.

The pace of growth in Australia has slowed to 2 per cent year-on-year as the economy grapples with both the end of a mining investment boom and the deceleration in China, its biggest trading partner. The jobless rate is near its highest level in more than a decade and it's unclear whether the installation of new Prime Minister Malcolm Turnbull will provide a lasting boost to business and consumer confidence.

Australia & New Zealand Banking, which had previously forecast that the RBA would keep its cash rate at an already record low 2 per cent, last week broke ranks with the country's other major banks in predicting another 50 basis points of cuts in 2016.

The median forecast among economists is for no change through the end of next year, based on a Bloomberg survey published September 25.

National Australia Bank forecasts the RBA will stand pat and says anyone buying bonds now may be investing at the wrong time.
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newjez
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Will Australia have similar issues?

http://www.telegraph.co.uk/motoring/car-manufacturers/volkswagen/11894667/Volkswagen-suffers-as-buyers-abandon-its-debt.html
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createdby
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newjez
28 Sep 2015, 03:16 PM
Government bonds are different from corporate bonds in that a government can just print more money or tax more or issue newer bonds to pay existing bonds. Up to a point of course. I don't think Australia's at that point yet compared to other countries. Maybe in 3-5 years.
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herbie
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createdby
28 Sep 2015, 09:01 PM
Government bonds are different from corporate bonds in that a government can just print more money or tax more or issue newer bonds to pay existing bonds. Up to a point of course. I don't think Australia's at that point yet compared to other countries. Maybe in 3-5 years.
Or maybe in 15 - 45 yrs.
Edited by herbie, 28 Sep 2015, 09:58 PM.
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createdby
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herbie
28 Sep 2015, 09:55 PM


Or maybe in 15 - 45 yrs.
It depends if we get captured by monetarists or Keynesians. Japan and US have. As David Stockman says, they printed more money in the last 5 years than the 95 years that the Fed has existed.

I don't think Glen Stevens is that crazy. Although Rudd was close to blowing up the budget with Rudd checks.
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deluded
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John Frum
27 Sep 2015, 12:19 PM

Therefore bond pricing for smaller economies like ours will come to be based less on central bank manipulations and more on percieved risk, and for Australia the risks are increasing every day - our weakening currency and stock market volatility are testament to that.
The interesting point is where the risk of lending is dependent on the debtor's ability to borrow more money...

Diabolical isn't it.
deluded
28 Sep 2015, 10:42 PM
The interesting point is where the risk of lending is dependent on the debtor's ability to borrow more money...

Diabolical isn't it.
If I lend them the money now, then they can pay off the previous tranch of debt they borrowed from me. And if someone else lends them some more money in the future then they will be able to pay off the debt I'm considering lending to them now. God I hope there's a bigger fool out there in the future who's willing to lend to them in my time of need!

Meh, I just print the shit anyway.
Edited by deluded, 28 Sep 2015, 10:50 PM.
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hidflect
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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.




They'll cut alright. The temptation is too large. And then cut again and again as nothing happens except an AUD fall. I foresee Oz in NIRP zone in 2 years.
createdby
28 Sep 2015, 11:42 AM
http://www.smh.com.au/business/markets/australian-bonds-a-buy-at-fidelity-worldwide-as-dollar-falls-20150927-gjw4uk.html

Australian bonds a 'buy' at Fidelity Worldwide as dollar falls

September 28, 2015 - 9:24AM

International investors' appetite for Australian bonds has waned as the local dollar tumbled. Fidelity Worldwide Investment has been sticking with its holdings and says it's time to consider buying.

"It could be the turning point," said Andrew Wells, the chief investment officer for fixed income at Fidelity Worldwide, which has $US290 billion in assets. "We do have big exposure in Australia. We have liked it for some time," he said in an interview last week in Singapore.

While official data show offshore bond buyers have cut the proportion of Aussie debt they own to the lowest level since 2009, the currency has dropped 20 per cent over the past year to a level that no longer seems "seriously misaligned" to the central bank. It bought US70.33¢ late on Friday in Sydney, and the median forecast in a Bloomberg survey of analysts is for it to be around US69¢ at the end of next year.

As well as currency stabilisation, the possibility of further easing from the Reserve Bank of Australia may also provide support for Aussie bonds.

While the RBA has signalled its reluctance to cut, the swaps market is pricing in a 57 per cent chance of a reduction by the end of March. By contrast, the U.S. Federal Reserve is preparing to raise interest rates for the first time in almost a decade.

The pace of growth in Australia has slowed to 2 per cent year-on-year as the economy grapples with both the end of a mining investment boom and the deceleration in China, its biggest trading partner. The jobless rate is near its highest level in more than a decade and it's unclear whether the installation of new Prime Minister Malcolm Turnbull will provide a lasting boost to business and consumer confidence.

Australia & New Zealand Banking, which had previously forecast that the RBA would keep its cash rate at an already record low 2 per cent, last week broke ranks with the country's other major banks in predicting another 50 basis points of cuts in 2016.

The median forecast among economists is for no change through the end of next year, based on a Bloomberg survey published September 25.

National Australia Bank forecasts the RBA will stand pat and says anyone buying bonds now may be investing at the wrong time.
And the opposite story from the exact same newspaper. Yes and No. Take your pick.

http://www.smh.com.au/business/markets/foreign-holdings-of-australian-government-bonds-may-have-peaked-20150923-gjt1da.html
Edited by hidflect, 29 Sep 2015, 03:00 AM.
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John Frum
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BOOM!
"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.
Profile "REPLY WITH QUOTE" Go to top
 
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