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If I'm reading this correctly, the rate in question is an overnight rate, but quoted annually. A better way of looking at it is probably the overnight premium
by cperciva 6y ago
If I'm reading this correctly, the rate in question is an overnight rate, but quoted annually. A better way of looking at it is probably the overnight premium -- which looks like it's somewhere around a 1% cost to borrow money today to be paid back tomorrow.
EDIT: And this is specifically in the offshore market. The article doesn't mention high interest rates for Turkish banks to borrow Lira. This sounds like more of a matter of currency controls and market manipulation rather than an indicator of a currency collapse or the return of hyperinflation.
- Areading314 6y agoInterest rates are almost always quoted in the annualized rate (eg. APR)
- cperciva 6y agoSure, but that's not necessarily a useful way of looking at the overnight rate in this case. Annualized interest rates are useful when you're looking at the value of an investment changing over time; but in this case the nature of the investment is changing -- because the critical property "can be delivered to close a contract today" is satisfied by today-lira but is not satisfied by tomorrow-lira.
- phyalow 6y agoUh, all interest rates are quoted annualised, thats to make them directly comparable... to get the notional change just divide it by (365/tenor). Your other points are flatly nonsensical.