Australian T-bond market, - where 10-year T-bond yields have been trending higher for the past 13-months, even while the Reserve Bank of Australia (RBA) was engaged in a rate cutting campaign.
Despite the 10 year bond yield rising over the last year, the yield is still below what it was in April last year and far below what it was for the whole of the more than 40 years before then.
The 10 year rate is not simply about the current cash rate. Rising market long term rates are reflective of the markets expectations of the future.
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I'll say it again, interest rates will rise sooner than the market expects.
Good luck with knowing better than the market.
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The RBA is using it's last bit of ammo to stimulate the economy and at the same time is leading the property sheep to slaughter.
I can understand a doom prediction which asserts a crash despite low interest rates.
But I fail to understand a doom prediction based on coming high interest rates which will only ever be imposed in a healthy economy.
You seem to be suggesting that the RBA will not be able to keep low interest rates. The RBA is entirely in control of Australian interest rates. Market interest rates may rise based on the market's expectations of future RBA action.
else i'll ask you a silly question too - do you know how to build up a cap rate for a comemrcial property? my guess is that you need to dig a little deeper to discover the true impact QE has on asset prices.
Tell me how you think adding to the reserves of the banking system increases company profits?
Catweasel
2 Sep 2013, 05:49 PM
b_b
2 Sep 2013, 05:26 PM
Never said that.
Chin scratch say "As for QE has an impact on market prices - well I think that is nonsense".
Maybe it true or maybe it not.
But it cannot prove simply on a belief system.
In the reality,
it have no the proof for what it believe and it cannot QE disprove not that influence a asset the price.
That the problem with majority of the beigists.
Its belief systems become so the strong.
All the notion of empirical the test,
go out a back door.
You Said
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Chin scratch believes it can predict an equity market with or without a QE.
You seem to be suggesting that the RBA will not be able to keep low interest rates. The RBA is entirely in control of Australian interest rates. Market interest rates may rise based on the market's expectations of future RBA action.
I believed this was the case also. Can we confirm 100% without doubt that they are not required by any legislation to raise or lower the cash rate at any time? Of course (and importantly) there could be dire consequences with poor policy but the RBA still have total and absolute control of the cash rate, right?
thanks
APF - a place where serious people don't take themselves too seriously. There's nothing else like it.
You seem to be suggesting that the RBA will not be able to keep low interest rates. The RBA is entirely in control of Australian interest rates. Market interest rates may rise based on the market's expectations of future RBA action.
I believed this was the case also. Can we confirm 100% without doubt that they are not required by any legislation to raise or lower the cash rate at any time? Of course (and importantly) there could be dire consequences with poor policy but the RBA still have total and absolute control of the cash rate, right?
thanks
The RBA is in total control of the short end (inside money) interest rate so long as it is in AUD. Every bond eventually prices off the final short end rate (as they reach maturity). So in effect, the RBA indirectly impacts the price of long term money too.
Tell me how you think adding to the reserves of the banking system increases company profits? You Said
I never said that. It was false.
It's a rather logical explanation when one has TBTF corporations generating 'investment' profits off the back of a buyer 'of last resort' who is lending at artificially cheap rates. For what's it's worth, Nanex and Zerohedge are probably the closest to showing the correlation. QE is not only a process of 'adding to the reserves of the banking system'.
Cap rates have everything to do with long bond rates. This is Property Finance 101.
The RBA is in total control of the short end (inside money) interest rate so long as it is in AUD. Every bond eventually prices off the final short end rate (as they reach maturity). So in effect, the RBA indirectly impacts the price of long term money too.
thaks for that b_b
APF - a place where serious people don't take themselves too seriously. There's nothing else like it.
It's a rather logical explanation when one has TBTF corporations generating 'investment' profits off the back of a buyer 'of last resort' who is lending at artificially cheap rates. For what's it's worth, Nanex and Zerohedge are probably the closest to showing the correlation. QE is not only a process of 'adding to the reserves of the banking system'.
Cap rates have everything to do with long bond rates. This is Property Finance 101.
Firstly, I think you mean long bond rates impact cap rates (back to 101 class for you?). Even so, you would still be wrong (real long bonds are far more important).
Secondly, qe adds to bank reserves. And banks can not lend out reserves. So you seem very confused, perhaps because you are getting your education from "zeroclue". The same mob who predicted the us would be broke by 2012, and hyperinflation was inevitable.
b_b
2 Sep 2013, 07:00 PM
Firstly, I think you mean long bond rates impact cap rates (back to 101 class for you?). Even so, you would still be wrong (real long bonds are far more important).
Secondly, qe adds to bank reserves. And banks can not lend out reserves. So you seem very confused, perhaps because you are getting your education from "zeroclue". The same mob who predicted the us would be broke by 2012, and hyperinflation was inevitable.
As I said, asset prices are up because profits are up. Swelling bank reserves does not help corporate profits. In fact, it hurts them.
QE I and II were asset swaps of credit securities for cash. Reserves did not increase.
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And banks can not lend out reserves.
Banks can and have repo'd cash for equity on very short durations.
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As I said, asset prices are up because profits are up.
Asset prices have risen faster than profits, so either you are incorrect, or the next 10-20 years of future profits are already priced into asset prices, and hence they will stop rising. Corporate profits are up because personal income is declining, and has been since 2008.
Firstly, I think you mean long bond rates impact cap rates (back to 101 class for you?). Even so, you would still be wrong (real long bonds are far more important).
Secondly, qe adds to bank reserves. And banks can not lend out reserves. So you seem very confused, perhaps because you are getting your education from "zeroclue". The same mob who predicted the us would be broke by 2012, and hyperinflation was inevitable. As I said, asset prices are up because profits are up. Swelling bank reserves does not help corporate profits. In fact, it hurts them.
Are you a banker? That would explain a few things.
Did I say short term bond rates? Don't think so - read again. No need to lecture someone with a degree in property.
Whether you can lend the reserves or not, doesn't deter TBTF banks to speculate MORE on asset prices.
Not sure why all the fuss about tapering then - it's all because of profits, you say.
Care to show us when zerohedge predicted that - send link please.
You just carry on reading your sources, I'll stay to mine. The more ignorant people like you keep bidding asset prices up with no real fundamentals the better the show for us willing to dig a little deeper.
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