4 ms·

For the purposes of attracting capital, that consistent history hurts them, no? Investors want higher rates, not lower, in this case.

onlyrealcuzzo 4y ago
Few foreign investors are buying UK & European treasuries. It's mostly the ECB and BoE - and local pension funds mandated by local governments - so foreign investors are irrelevant. General investors usually prefer low rates because they want their asset prices to be inflated.
- outside1234 4y ago
  If investors you mean people taking out shorter dated loans to buy higher expectation yield securities (aka "the carry trade"), then yes, they want lower rates. But for investors choosing between a basket of interest bearing sovereigns, they will choose the bond that has the largest risk adjusted rate of return 101% of the time. This is what you are seeing in exchange rates, the exchange rates are swinging to normalize this risk. (ie. There is an appropriate amount of premium in investing in USD that balances the currency exchange rate risk of the exchange rates swinging back on you.)
  - onlyrealcuzzo 4y ago
    > But for investors choosing between a basket of interest bearing sovereigns, they will choose the bond that has the largest risk adjusted rate of return 101% of the time. The percentage of bonds bought by this type of investor is so small that the ECB, BoE, BoJ, and FED aren't even giving them consideration. The only reason anyone in their right mind would buy a 10-year treasury from the BoJ at negative interest rates is if they feel like the BoJ will eventually buy back the worthless bond from them for even more money than they bought it for originally. Traditionally, this has been a pretty safe bet - because the entire economy of Japan is dependent upon the BoJ paying people endlessly more money for the same worthless garbage...

4 ms·

For the purposes of attracting capital, that consistent history hurts them, no? Investors want higher rates, not lower, in this case.

by pwinnski 4y ago

onlyrealcuzzo 4y ago
Few foreign investors are buying UK & European treasuries. It's mostly the ECB and BoE - and local pension funds mandated by local governments - so foreign investors are irrelevant. General investors usually prefer low rates because they want their asset prices to be inflated.
- outside1234 4y ago
  If investors you mean people taking out shorter dated loans to buy higher expectation yield securities (aka "the carry trade"), then yes, they want lower rates. But for investors choosing between a basket of interest bearing sovereigns, they will choose the bond that has the largest risk adjusted rate of return 101% of the time. This is what you are seeing in exchange rates, the exchange rates are swinging to normalize this risk. (ie. There is an appropriate amount of premium in investing in USD that balances the currency exchange rate risk of the exchange rates swinging back on you.)
  - onlyrealcuzzo 4y ago
    > But for investors choosing between a basket of interest bearing sovereigns, they will choose the bond that has the largest risk adjusted rate of return 101% of the time. The percentage of bonds bought by this type of investor is so small that the ECB, BoE, BoJ, and FED aren't even giving them consideration. The only reason anyone in their right mind would buy a 10-year treasury from the BoJ at negative interest rates is if they feel like the BoJ will eventually buy back the worthless bond from them for even more money than they bought it for originally. Traditionally, this has been a pretty safe bet - because the entire economy of Japan is dependent upon the BoJ paying people endlessly more money for the same worthless garbage...