2 ms·
> Somebody is on the wrong side of this trade in a big way. My understanding is that banks get negative interest on deposits in the banking system over night f
by rightbyte 5y ago
> Somebody is on the wrong side of this trade in a big way.
My understanding is that banks get negative interest on deposits in the banking system over night from many European central banks. So if you pay say -0.x% on deposits then 1.85% over 30y is a bargain.
- second--shift 5y agoThe fundamental problem with your hypothesis is the time-value of money: overnight deposits can be moved around, well, overnight, but a 30yr bond (for the bondholder, ignoring secondary markets) locks up capital for decades. A bondholder can't take advantage of future preferential interest rates when their capital is already locked up in low-yielding bonds. This is why bond price and bond yields have an inverse relationship.