It's deja vu all over again.

Hmmm.......

I can already hear the Germans singing...."Deutschland, Deutschland über alles, Über alles in der Welt". :p

http://www.youtube.com/watch?v=zfzZdSxkzMw

Just be careful that you don't sing it near Germans as they lost most of its words as this was the German national nathem under Hitler!!

Token Funder said:
Perhaps we could invite the Germans to take over Italy, Spain and Greece, but this time without all the Blitzkreiging.

Given they're likely to be paying for them anyway, it only seems fair.
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Shadow said:
Token Funder said:
I know Mr Joye rather well and I can dispel any notion that he and Shad are the same person ;)
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Yeah but mate you took a fair bit of convincing last time we caught up! So, it would seem that you finally believe I'm not the infamous Shadow?
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I'm confused.

As a newbie here, I have no idea who any of these people are and haven't been following along, but the above comment struck me as reading like someone forgot they were posting as "Shadow" when they said "So, it would seem that you finally believe I'm not the infamous Shadow?"

Am I missing something ?
 
MikeR said:
I'm confused.

As a newbie here, I have no idea who any of these people are and haven't been following along, but the above comment struck me as reading like someone forgot they were posting as "Shadow" when they said "So, it would seem that you finally believe I'm not the infamous Shadow?"

Am I missing something ?
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yes, a sense of humour. easily forgiven on the Internet. re read the posts.
Chirs Joye runs the data provider rp data / rismark.
 
Token Funder said:
The relationship between the OCR and bank funding costs have been in a state of disconnect for some time. It's not outside the realms of possibility that, if things get nasty globally, a 25bp reduction in the OCR in Feb could be followed by increases in bank lending rates, not decreases :eek:
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TF,

What surprises me is that with guarantees on deposits and covered bonds on the table, that anyone would buy Australian RMBS anyway apart from our government who does have a rather large appetite for them.

when you can get similar yields on bonds which are probably the safest investment around (as I understand it now coming before deposits in a liquidation rather than after!) who would buy RMBS, now anyway?
 
tom32 said:
TF,

What surprises me is that with guarantees on deposits and covered bonds on the table, that anyone would buy Australian RMBS anyway apart from our government who does have a rather large appetite for them.

when you can get similar yields on bonds which are probably the safest investment around (as I understand it now coming before deposits in a liquidation rather than after!) who would buy RMBS, now anyway?
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not sure, but perhaps on/off sheet balance issues.
 
Watching Fox Biz the other night and Telstra, Newcrest and Cochlear (I think) have just arranged billion$ + funding @ around 4%.

How come our banks can't do that? the lenders must perceive extra risk in the banks. Does that mean that, as I investor, I should buy these companies and not the banks?
 
tom32 said:
TF,

What surprises me is that with guarantees on deposits and covered bonds on the table, that anyone would buy Australian RMBS anyway apart from our government who does have a rather large appetite for them.

when you can get similar yields on bonds which are probably the safest investment around (as I understand it now coming before deposits in a liquidation rather than after!) who would buy RMBS, now anyway?
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Bonds are an IOU issued by an entity but usually not specifically "secured" by a specific asset.
RMBS (as a general proposition), are IOUs secured against a specific asset (i.e. mortgages in a trust) .
Covered bonds are a combination of each.
The question of whether you'd buy one over the other is really just a matter of risk-based return. RMBS, for example, might be considered a better be than, say, Italian govt bonds.....
 
Sunfish said:
Watching Fox Biz the other night and Telstra, Newcrest and Cochlear (I think) have just arranged billion$ + funding @ around 4%.

How come our banks can't do that? the lenders must perceive extra risk in the banks. Does that mean that, as I investor, I should buy these companies and not the banks?
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It's a mistake to assess the cost of borrowing in foreign currency just by the interest rate. Telstra's USD 4.8% is not the same cost of money as 4.8% sourced locally in AUD.
 
Sunfish said:
Watching Fox Biz the other night and Telstra, Newcrest and Cochlear (I think) have just arranged billion$ + funding @ around 4%.

How come our banks can't do that? the lenders must perceive extra risk in the banks. Does that mean that, as I investor, I should buy these companies and not the banks?
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Today BHP announced that it had raised $3 bill in three tranches. $1,000 mill at 1.125% for 3 years, $750 mill @ 1.875% for 5 years and $1,250 mill @ 3.25% for 10 years

Are our banks lying about cost of overseas funds or are they credit risks?
 
This is certainly an interesting question. The banks have higher credit ratings so that doesn't explain it. Sovereigns such as Australia have even higher ratings again. BHP is A, WBC is AA and Aus Govt is AAA. Certainly it would help that BHP don't actually need the money but still that's an extremely low cost of debt for 2014 maturity. Who gives people their money for that price, other than central banks?

Of course these are senior bonds but still... those are much lower yields than the Australian govt gets... :eek:

I'm sure I'm missing something here - I'd just love to know what it is! :confused:
 
Actually I think Marty stated what it would likely be and TF as well - the BHP debt is in USD and the Aus Govt / Bank debts are in AUD. In the first instance, BHP takes exchange rate risk and effectively the Aus Govt / Bank debts don't - their lenders do instead. Hence the higher rate for them. But has the cost of hedging forex risk really risen to this extent? With the recent volatility in AUD / USD I actually wouldn't be surprised about that but would be happy to be proven wrong.
 
Aaron_C said:
Actually BHP doesn't take the exchange rate risk because they report in USD anyway
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That's just reporting. They're dual listed - Australia and UK. They pay dividends in AUD and GBP, not USD. Their reporting methods are an internal matter.

But I agree to the extent that many of their operations have inherent forex risks courtesy of operating (or selling) in those jurisdictions and raising money in those markets (rather than AUD and GBP) can help them balance (or effectively reduce) their exposure when looking at the forex balance of their overall portfolio of assets.
 
Ahh I think I have got it. BHP regardless of reporting country would be trading with China / India et al in US dollars.... As US treasuries are effectively paying negative returns when adjusted for inflation the American money market must be funding company bonds like these as these types of prices. No hedge required for BHP, sweet deal.

The banks though? Why can't they do similar even with a hedge? Well think about the aud$ versus the USA$ over the last 5 years. How would insurance against those swings? It must just be that?
 
Marty McDonald said:
The banks though? Why can't they do similar even with a hedge? Well think about the aud$ versus the USA$ over the last 5 years. How would insurance against those swings? It must just be that?
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Makes sense to me. The banks (and our govts) have no natural need for USD (unlike BHP) and need their funding in AUD. The price of hedging certainly looks pretty steep but that is understandable given recent history on that front.
 
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