4 ms·

I don't understand why you would lock up that much money for 10 years at 1.5% interest. Did they expect interest rates to stay at 0 for 10 years? That is illo

I don't understand why you would lock up that much money for 10 years at 1.5% interest. Did they expect interest rates to stay at 0 for 10 years? That is illogical.

rvnx 4y ago
Especially illogical, considering it's not their own money that they locked, but customers funds (that they owe to the customer in the short-term).
abm53 4y ago
If that was the market clearing price, then to the extent that rate expectations set the bond price (which of course is debatable) this would have been the consensus view at the time.
- Dylan16807 4y ago
  You can't really capture consensus with a single number. Maybe the market expects a likely range of 1%-2%. Maybe the market expects a likely range of 0%-5%. Those could both have an expected value of 1.5%, with much different levels of risk for this use case.
BoiledCabbage 4y ago
They wanted to chase high-yields in low yield environment. The only way to do so was to take on more risk, specifically interest rate risk. They ignored the fact that it was risky because it was a "safe bond" and got nailed by it.