Wanderer78 wrote: » am i right in saying, negative rates are for government bonds, and not the majority of deposits?
schmittel wrote: » Happy new year to all. 2020 was the year of pent up demand. I think 2021 will be the year the pent up supply comes to market. I think the pent up supply will exceed the pent up demand and prices will fall. By how much I have no idea!
Timing belt wrote: » Think it will start at around 100k but will drop to 50k by end of year. Maybe I am wrong and they don’t do it for some legal reason and sit with losses for the next few years or increase margins on lending to compensate. I think they will spend on personal property mainly as it’s perceived as a safe asset that will hold value. In addition to banks charging negative interest I think the Stock market will have a correction at some stage in Q1 if their is no sign of inflation. Normally people shift funds from shares to bonds when this happens which would lead to lower bond yields. But can see people moving to property as an alternative to avoid negative yields on bonds. And this will drive the investment properties.
wowy wrote: » https://www.independent.ie/business/personal-finance/banking/aib-to-cut-a-string-of-deposit-rates-to-zero-and-impose-negative-rates-on-more-firms-39614046.html I dunno where this recent talk of negative interest rates for general personal deposit accounts came from? The above article from October reports that the only private deposit accounts that will be likely to incur them (this year anyway) will be for €1M+ balances, and how many of those are there?
Wanderer78 wrote: » yea, i think people are getting confused with negative bond rates, as far as im aware, negative rates already exist on high deposit accounts, which means, there probably is none in irish banks, may stand corrected on that though
Timing belt wrote: » No people are not getting confused we are talking about banks passing on the cost of the excess liquidity to depositors. Currently they charge negative rates on business and some high net worth clients but I believe that during 2021 we will see the banks widen the catchment net by introducing tiered rates with any balance over x being charged a negative rate.
Wanderer78 wrote: » i really cant see many, if any businesses holding deposits above the cut off point, theyd be nuts to try introduce negative rates further down the trough, but who knows
Timing belt wrote: » Why would they be nuts if it saves them a considerable amount of money and is the difference between posting a profit or a loss for a year? Yes money would leave the banks and look for a new home which I think could be property as shares look overvalued, bonds have negative yield. So without taking on significant Risk property will be the natural choice.
TheSheriff wrote: Plenty of FTB's out there looking to buy, government eager to prop up prices.
schmittel wrote: Negative interest rates or not I do agree many will think keeping significant sums on deposit is a mugs game.
Timing belt wrote: Yes money would leave the banks and look for a new home which I think could be property as shares look overvalued, bonds have negative yield. So without taking on significant Risk property will be the natural choice.
Wanderer78 wrote: » it doesnt make sense to me for a businesses or individuals to hold deposits above threshold points, if negative rates kick in, so does it actually happen in reality, i suspect not, but i could be wrong? it would makes sense to me to have multiple accounts across many providers, making sure no account ever hits this threshold, even though im unsure if that is in fact allowed?
Villa05 wrote: » Ye do realise what you are describing is the mother of all asset price bubbles. I wonder if their are any pins out there to burst it
Timing belt wrote: » Yip well aware of it... the only asset that does not look like it has a bubble is property and hence why I am saying funds will start to flow into it. If we do have a repeat of the roaring 20's as a lot expect will happen accompanied by inflation then there is an argument for the valuations but if this does not materialise then the Pin that I think will burst it is a lack in Inflation in the months ahead.
Timing belt wrote: » There are only 5 providers in Ireland and if the banks set a threshold of 30k for negative rates then that would mean any deposits over 150k (30k x 5) would end up being charged negative interest. The thing that needs to be remembered is the longer we are in a low interest rate environment the likelihood of this happening increases. Yes ECB has been charging negative rates for years but the banks benefited from a yield on government bonds. With the yield on Government bonds being negative and looking to remain like this for quite a bit the banks end up having to roll over bonds onto a negative rate and this is when they will pass the cost onto retail customers. E.g. Bank of Ireland hold 16bn of governments bonds and the rate of return dropped to 0.14% at June 2020... At the year end this will probably be half that at 0.07% and June 2021 0.00%.
schmittel wrote: » Look at global commodity prices. Inflation is happening. It’s about the only argument for rising property prices that I can get my head around.
Timing belt wrote: » What we are seeing in commodity prices is inflation in metals as people hedge as they expect to see inflation in the future. This is speculation and not real inflation with the exception of Steel as China is push steel prices higher with the demand that they have to build infrastructure as part of their fiscal spending to deal with Covid. Energy prices are still low and not what you would expect for booming economies Agriculture and lumber have modest inflation (with the exception of Coffee).
schmittel wrote: » Not real inflation! Do you work for a central bank?!
Pelezico wrote: » Inflation in all asset classes abounds. From bitcoin, NASDAQ, Tesla, gold, silver, commodities. Oil at $50 a barrel is very high given usa and europe in recession.
Pelezico wrote: » Iron ore booming and demand from China is enormous.
Villa05 wrote: » How does inflation take off in highly indebted nations on high wages but living paycheck to paycheck. Where is the scope for wage inflation Is stagflation a more realistic outcome?
Timing belt wrote: » What I mean is that it is speculation with investors pilling into gold, Silver, Bitcoin etc as they expect to see inflation in the future. They are not using the Gold or Silver to produce any goods so it will not make its way into the CPI.
schmittel wrote: » Bitcoin is not a commodity. I agree it is a pure speculative hedge. If people are piling into precious metals as a hedge because they expect to see inflation in the future one wonders why gold and silver prices have lagged the broader commodities index. Look at copper, iron ore, soy beans etc, wheat etc - very real inflation in these commodities.
Timing belt wrote: » Time will tell...... CPI for Dec is out on the 14th of Jan the same day as RPPI for November
