Is the NTMA behaving responsibly?

realitykeeper

The NTMA has now taken to issuing inflation linked bonds. Have they completely lost the plot? Ireland is extremely indebted and the only possible way the country might conceivably reduce its debt burden in future is through high inflation.

Now, no thanks to the NTMA, even high inflation will not be able to save us because they are issuing inflation linked bonds. Is there a chain of accountability in order to hold someone responsible for this if inflation takes off? Why wasn`t something done to stop them from doing this, was the minister sleeping on the job? Why didn`t the central bank advise against it? This is surely the last straw! Come the next recession, the country is doomed.

Jawgap

Less than 10% of the bonds issued this year have been inflation linked and they've pretty much met the target for debt for this year and it's not even May.....

......we have cash up to our oxters, and it looking increasingly likely we'll be able to re-finance what that is due in the next 3 to 5 years relatively easily.

Plus, the bond in question is only paying 25 percantage points over the CPI and even if inflation does go nuts, the bond in question was bought by ourselves through a number of Irish insurance and pension funds....meaning the money when it's repaid will be repaid into our own pockets......we've borrowed from ourselves.

Levels of debt are irrelevant - it's the ability to manage the debt that matters - a simple example if you borrow €1m but your income is €10m the debt is easy to manage......if you borrow €1000, and only have an income of €250, you're goosed.

blanch152

realitykeeper wrote: »

The NTMA has now taken to issuing inflation linked bonds. Have they completely lost the plot? Ireland is extremely indebted and the only possible way the country might conceivably reduce its debt burden in future is through high inflation.

Now, no thanks to the NTMA, even high inflation will not be able to save us because they are issuing inflation linked bonds. Is there a chain of accountability in order to hold someone responsible for this if inflation takes off? Why wasn`t something done to stop them from doing this, was the minister sleeping on the job? Why didn`t the central bank advise against it? This is surely the last straw! Come the next recession, the country is doomed.

Is there a link from a reputable news source that has analysed this and reached the same conlcusions available to back up this?

realitykeeper

blanch152 wrote: »

Is there a link from a reputable news source that has analysed this and reached the same conlcusions available to back up this?

I forgot to post this link which confirms the NTMA did this: https://www.rte.ie/news/business/2017/0420/868969-inflation-linked-bond/
Not sure what analysis you are looking for but I assume you do not doubt the part about Ireland being highly indebted. Obviously high interest rates are something that might never happen but if they do it would be like having a fixed or variable rate mortgage on which you would have to pay high interest rates.

More pointedly, the Basel Committee want banks to limit their exposure to fixed rate mortgages in order to shift the risk to borrowers: http://www.irishtimes.com/business/financial-services/banks-may-face-restrictions-on-fixed-rate-mortgages-mep-warns-1.2822955

I wonder why.

hungry hypno toad

Are you behaving responsibly, OP? Is scaremongering considered responsible behaviour?

realitykeeper

Jawgap wrote: »

Less than 10% of the bonds issued this year have been inflation linked and they've pretty much met the target for debt for this year and it's not even May.....

The NTMA has only just issued its first inflation linked bond probably because that is the only type of bond they are allowed to issue as they have already reached their quota with EU funny money. Of course less than 10% is inflation linked, they have only just started issuing inflation linked bonds.

Jawgap

realitykeeper wrote: »

I forgot to post this link which confirms the NTMA did this: https://www.rte.ie/news/business/2017/0420/868969-inflation-linked-bond/
Not sure what analysis you are looking for but I assume you do not doubt the part about Ireland being highly indebted. Obviously high interest rates are something that might never happen but if they do it would be like having a fixed or variable rate mortgage on which you would have to pay high interest rates.

More pointedly, the Basel Committee want banks to limit their exposure to fixed rate mortgages in order to shift the risk to borrowers: http://www.irishtimes.com/business/financial-services/banks-may-face-restrictions-on-fixed-rate-mortgages-mep-warns-1.2822955

I wonder why.

Sorry, OP but you're making very little sense.......

......the coupon on those bonds is linked to the CPI.......the CPI is normally something that is inversely linked to interest rates.....so if interest rates escalate, this bond will, likely, be s bad bet for whoever bought it?

......or to put it another way, the only reason the NTMA had such an easy time getting this particular bond away is because people believe interest rates will remain low in the short to medium term and therefore a pay out linked to inflation represented a decent prospect.

Jawgap

realitykeeper wrote: »

The NTMA has only just issued its first inflation linked bond probably because that is the only type of bond they are allowed to issue as they have already reached their quota with EU funny money. Of course less than 10% is inflation linked, they have only just started issuing inflation linked bonds.

Do you know they have a "quota"?

And what's your basis for suggesting they have?

realitykeeper

Jawgap wrote: »

Do you know they have a "quota"?

And what's your basis for suggesting they have?

Wasn`t there something about that in the news awhile back when the ECB were talking about scaling back their QE program? Irish commentators were bewailing the fact that Ireland had already borrowed what it was allowed to borrow and now the country would (to their way of thinking) be at a disadvantage because it could not borrow even more when other countries that had not borrowed their full allocation could continue to borrow.

realitykeeper

Jawgap wrote: »

Sorry, OP but you're making very little sense.......

......the coupon on those bonds is linked to the CPI.......the CPI is normally something that is inversely linked to interest rates.....so if interest rates escalate, this bond will, likely, be s bad bet for whoever bought it?

......or to put it another way, the only reason the NTMA had such an easy time getting this particular bond away is because people believe interest rates will remain low in the short to medium term and therefore a pay out linked to inflation represented a decent prospect.

Sounds wonderful, just like the celtic tiger before the ugly truth emerged and spoiled everything.

Jawgap

realitykeeper wrote: »

Wasn`t there something about that in the news awhile back when the ECB were talking about scaling back their QE program? Irish commentators were bewailing the fact that Ireland had already borrowed what it was allowed to borrow and now the country would (to their way of thinking) be at a disadvantage because it could not borrow even more when other countries that had not borrowed their full allocation could continue to borrow.

I take it that's a very long winded way of saying you don't have something to support your contention about there being a "quota"?

Jawgap

realitykeeper wrote: »

Sounds wonderful, just like the celtic tiger before the ugly truth emerged and spoiled everything.

So, you seem to be a bit all over the page.......are you predicting high interests rates, rampant inflation, or both?

Or are you suggesting, given your reference to the Celtic Tiger, that we're back in an asset bubble?

tomwaterford

realitykeeper wrote: »

The NTMA has only just issued its first inflation linked bond probably because that is the only type of bond they are allowed to issue as they have already reached their quota with EU funny money. Of course less than 10% is inflation linked, they have only just started issuing inflation linked bonds.

If this is ture.....it surly spells bad news for the Irish economy?

realitykeeper

Jawgap wrote: »

I take it that's a very long winded way of saying you don't have something to support your contention about there being a "quota"?

De gnáth, tá tú miceart. Here it is: http://www.irishtimes.com/business/markets/ecb-purchases-of-irish-bonds-fall-45-as-limits-bite-1.2966519

realitykeeper

Jawgap wrote: »

So, you seem to be a bit all over the page.......are you predicting high interests rates, rampant inflation, or both?

Or are you suggesting, given your reference to the Celtic Tiger, that we're back in an asset bubble?

At some point in the not too distant future, inflation will begin to rise very rapidly as confidence is lost in the Euro, US dollar, UK pound and such currencies. In order to counter this, central banks will increase interest rates, - a lot. As for being in an asset bubble, I would have thought that was obvious since the original bubble was re-inflated with funny money.

Jawgap

realitykeeper wrote: »

De gnáth, tá tú miceart. Here it is: http://www.irishtimes.com/business/markets/ecb-purchases-of-irish-bonds-fall-45-as-limits-bite-1.2966519

Ok, I'm sure that link supports something, but does it really support your statement that the NTMA have a quota they can't exceed, as per your post.....

realitykeeper wrote: »

The NTMA has only just issued its first inflation linked bond probably because that is the only type of bond they are allowed to issue as they have already reached their quota with EU funny money. Of course less than 10% is inflation linked, they have only just started issuing inflation linked bonds.

.....surely if anyone is being bound by a quota it is, per the link you posted, the ECB and not the NTMA?

.....and if I'm reading your link correctly, the ECB are the ones bound by a 'quota' and are limited in the amount of Irish debt they can buy......yet the NTMA are still getting bonds away (so much so they've almost met the target for the year and we're not even out of Q2).....yields are on the floor (not too far of the German yields) and your link contains a quote from a commentator that, in their view, ......".....Ireland can continue to participate in the ECB’s programme for the remainder of this year"......

.....I'm sorry but what does link actually prove except that the NTMA seem to be doing a reasonably competent (almost to the point of boredom) job at financing and re-financing our debt?

You do realise that in the last month or so, in addition to issuing an inflation-indexed bond, they also got away a similar sized amount of 12 month debt that offered a negative interest yield......people are effectively paying the NTMA a 0.43 per cent rate for the privilege of holding their money for 12 months!!

frankbrett

Jawgap wrote: »

Ok, I'm sure that link supports something, but does it really support your statement that the NTMA have a quota they can't exceed, as per your post.....



.....surely if anyone is being bound by a quota it is, per the link you posted, the ECB and not the NTMA?

.....and if I'm reading your link correctly, the ECB are the ones bound by a 'quota' and are limited in the amount of Irish debt they can buy......yet the NTMA are still getting bonds away (so much so they've almost met the target for the year and we're not even out of Q2).....yields are on the floor (not too far of the German yields) and your link contains a quote from a commentator that, in their view, ......".....Ireland can continue to participate in the ECB’s programme for the remainder of this year"......

.....I'm sorry but what does link actually prove except that the NTMA seem to be doing a reasonably competent (almost to the point of boredom) job at financing and re-financing our debt?

You do realise that in the last month or so, in addition to issuing an inflation-indexed bond, they also got away a similar sized amount of 12 month debt that offered a negative interest yield......people are effectively paying the NTMA a 0.43 per cent rate for the privilege of holding their money for 12 months!!

You are correct. The OP is not. There is a limit to the amount of any country's debt the ECB via the national central banks can hold. The NTMA can issue debt even if this amount is exceeded as the ECB aren't the only purchaser of the debt. In the case of the inflation linked bond the amount issued is a small fraction of total debt outstanding and according to the NTMA arose via them being approached by "5-10" domestic institutions looking for such an instrument. In a scenario of rampant inflation, €600m of €200bn is index linked, the remainder is worth much less.

Zubeneschamali

realitykeeper wrote: »

At some point in the not too distant future, inflation will begin to rise very rapidly as confidence is lost in the Euro, US dollar, UK pound and such currencies.

You have been banging this drum for many years now, the curve will go vertical, hyperinflation etc.

Last time I asked, you said definitely by 2020. Is that still the timetable?

Just wondering how close we'll get before you move it out to 2025 rather than admit that you were wrong.

Jawgap

Zubeneschamali wrote: »

You have been banging this drum for many years now, the curve will go vertical, hyperinflation etc.

Last time I asked, you said definitely by 2020. Is that still the timetable?

Just wondering how close we'll get before you move it out to 2025 rather than admit that you were wrong.

Much much sooner than that apparently......from another thread......

realitykeeper wrote: »

Other countries were engaging in trade disputes during the depression of the thirties. Like I say, economics was not understood properly just like it is not understood today. Before this year [2017] is out, you will agree with me because the greatest depression in human history will start in a matter of months.

Rightwing

Jawgap wrote: »

Less than 10% of the bonds issued this year have been inflation linked and they've pretty much met the target for debt for this year and it's not even May.....

......we have cash up to our oxters, and it looking increasingly likely we'll be able to re-finance what that is due in the next 3 to 5 years relatively easily.

Plus, the bond in question is only paying 25 percantage points over the CPI and even if inflation does go nuts, the bond in question was bought by ourselves through a number of Irish insurance and pension funds....meaning the money when it's repaid will be repaid into our own pockets......we've borrowed from ourselves.

Levels of debt are irrelevant - it's the ability to manage the debt that matters - a simple example if you borrow €1m but your income is €10m the debt is easy to manage......if you borrow €1000, and only have an income of €250, you're goosed.

I hate this type of nonsense.

I see so many companies go bust because of this type of waffle. Debt can be useful to reduce the cost of capital, but debt levels are never irrelevant, particularly when the income dries up.

Jawgap

Rightwing wrote: »

I hate this type of nonsense.

I see so many companies go bust because of this type of waffle. Debt can be useful to reduce the cost of capital, but debt levels are never irrelevant, particularly when the income dries up.

Actually, it's not nonsense - many companies talk about the discipline of debt.....and yes disrupted cashflow can make it difficult to manage, just as excessive cashflow can make it a boon to the company (because it limits the pressure to pay a dividend)

Even Apple, with strong incomes, and mountains of cash still issues debt - the last quarter saw it 'pocket' nearly $16 billion in cash..... and shortly after it announced its results, the company issued $10 billion in debt (meaning it owes about $100billion in debt) - that's not a problem for Apple.

Rightwing

Jawgap wrote: »

Actually, it's not nonsense - many companies talk about the discipline of debt.....and yes disrupted cashflow can make it difficult to manage, just as excessive cashflow can make it a boon to the company (because it limits the pressure to pay a dividend)

Even Apple, with strong incomes, and mountains of cash still issues debt - the last quarter saw it 'pocket' nearly $16 billion in cash..... and shortly after it announced its results, the company issued $10 billion in debt (meaning it owes about $100billion in debt) - that's not a problem for Apple.

As I said debt can be useful, in fact at the right levels every company should issue debt. But, to say debt levels are irrelevant is akin to saying banging your head of a wall won't do damage.
Companies like Apple issue debt for a variety of reasons:
Reduce the overall cost of the capital that a company invests in its business.
Debt can enhance the returns for shareholders
Improve share price performance.
Can reduce tax liability

Jawgap

Rightwing wrote: »

As I said debt can be useful, in fact at the right levels every company should issue debt. But, to say debt levels are irrelevant is akin to saying banging your head of a wall won't do damage.
Companies like Apple issue debt for a variety of reasons:
Reduce the overall cost of the capital that a company invests in its business.
Debt can enhance the returns for shareholders
Improve share price performance.
Can reduce tax liability

I didn't say debt levels are irrelevant - I said absolute levels are irrelevant.

It's all relative, as Einstein would say

Rightwing

Jawgap wrote: »

I didn't say debt levels are irrelevant - I said absolute levels are irrelevant.

It's all relative, as Einstein would say

That's certainly an improvement, and indeed maybe good enough for a discussion board, but certainly not enough from a prospective investor.

The J Stands for Jay

Jawgap wrote: »

Less than 10% of the bonds issued this year have been inflation linked and they've pretty much met the target for debt for this year and it's not even May.....

......we have cash up to our oxters, and it looking increasingly likely we'll be able to re-finance what that is due in the next 3 to 5 years relatively easily.

Plus, the bond in question is only paying 25 percantage points over the CPI and even if inflation does go nuts, the bond in question was bought by ourselves through a number of Irish insurance and pension funds....meaning the money when it's repaid will be repaid into our own pockets......we've borrowed from ourselves.

Levels of debt are irrelevant - it's the ability to manage the debt that matters - a simple example if you borrow €1m but your income is €10m the debt is easy to manage......if you borrow €1000, and only have an income of €250, you're goosed.

I hope that was a typo and you meant basis points...

Jawgap

McGaggs wrote: »

I hope that was a typo and you meant basis points...

Yes, basis points

The J Stands for Jay

Jawgap wrote: »

Yes, basis points

Thank God for that. I would be kicking myself for missing out on an opportunity like that.

realitykeeper

Zubeneschamali wrote: »

You have been banging this drum for many years now, the curve will go vertical, hyperinflation etc.

Last time I asked, you said definitely by 2020. Is that still the timetable?

Just wondering how close we'll get before you move it out to 2025 rather than admit that you were wrong.

This is the year.

realitykeeper

Jawgap wrote: »

Actually, it's not nonsense - many companies talk about the discipline of debt.....and yes disrupted cashflow can make it difficult to manage, just as excessive cashflow can make it a boon to the company (because it limits the pressure to pay a dividend)

Even Apple, with strong incomes, and mountains of cash still issues debt - the last quarter saw it 'pocket' nearly $16 billion in cash..... and shortly after it announced its results, the company issued $10 billion in debt (meaning it owes about $100billion in debt) - that's not a problem for Apple.

Sorry Jawgap but Rightwing is right.

realitykeeper

Jawgap wrote: »

Ok, I'm sure that link supports something, but does it really support your statement that the NTMA have a quota they can't exceed, as per your post.....

I was referring to the amount of junk they can dump on the ECB.

Owryan

Zubeneschamali wrote: »

You have been banging this drum for many years now, the curve will go vertical, hyperinflation etc.

Last time I asked, you said definitely by 2020. Is that still the timetable?

Just wondering how close we'll get before you move it out to 2025 rather than admit that you were wrong.

Actually in another thread he brought the impending doom forward to sometime this year, or next year, maybe the year after or the one after that, but definitely this year....or not.

realitykeeper

Jawgap wrote: »

You do realise that in the last month or so, in addition to issuing an inflation-indexed bond, they also got away a similar sized amount of 12 month debt that offered a negative interest yield......people are effectively paying the NTMA a 0.43 per cent rate for the privilege of holding their money for 12 months!!

That does not surprise me in the slightest. These anomalies are a feature of extraordinary times and they mask the extraordinary consequences we will see later this year.

tomwaterford

Owryan wrote: »

Actually in another thread he brought the impending doom forward to sometime this year, or next year, maybe the year after or the one after that, but definitely this year....or not.

Tbf perhaps it's time to use/check outside econmic models??


Yous are all starting to sound like people who laughed at others for saying the Celtic tiger was false/property bubble and would implode??

Owryan

tomwaterford wrote: »

Tbf perhaps it's time to use/check outside econmic models??


Yous are all starting to sound like people who laughed at others for saying the Celtic tiger was false/property bubble and would implode??

If you look back at the op's history you ll see just how based in "reality" they are. They have been promising a glorious recession for the last few years.

Thats before you look at the fact they want to bring back workhouses, eliminate the poor, force people into homelessness so others can have their houses, make the low paid take pay cuts so the better off dont have to.

So pardon me if i dont take their ramblings so seriously

tomwaterford

Owryan wrote: »

If you look back at the op's history you ll see just how based in "reality" they are. They have been promising a glorious recession for the last few years.

Thats before you look at the fact they want to bring back workhouses, eliminate the poor, force people into homelessness so others can have their houses, make the low paid take pay cuts so the better off dont have to.

So pardon me if i dont take their ramblings so seriously

However is there inflation theory based in reality??

Jawgap

realitykeeper wrote: »

I was referring to the amount of junk they can dump on the ECB.

Except none of it carries a junk rating - even the short term money is well rated, not top tier, but way off a junk rating.

And if it's junk, why are the yields so low?

Jawgap

realitykeeper wrote: »

That does not surprise me in the slightest. These anomalies are a feature of extraordinary times and they mask the extraordinary consequences we will see later this year.

So I take it you are shorting like crazy and taking advantage of the low gold (relative) price?

Zubeneschamali

Jawgap wrote: »

So I take it you are shorting like crazy and taking advantage of the low gold (relative) price?

There's no point, everything wil be equally worthless apparently. The entire concept of money is going to explode.

Jawgap

Zubeneschamali wrote: »

There's no point, everything wil be equally worthless apparently. The entire concept of money is going to explode.

Yeah, that's why if I honestly believed what the OP believed I'd be buying gold like crazy - actual golf, not just trading it

realitykeeper

Owryan wrote: »

If you look back at the op's history you ll see just how based in "reality" they are. They have been promising a glorious recession for the last few years.

Thats before you look at the fact they want to bring back workhouses, eliminate the poor, force people into homelessness so others can have their houses, make the low paid take pay cuts so the better off dont have to.

So pardon me if i dont take their ramblings so seriously

Everyone need to take pay cuts, and what is wrong with ending poverty in the long term, are you suggesting the poor want to remain poor and making them rich is an act of genocide?

Wanderer78

realitykeeper wrote:

Everyone need to take pay cuts, and what is wrong with ending poverty in the long term, are you suggesting the poor want to remain poor and making them rich is an act of genocide?

Maybe we need to change the systems that distribute wealth so that it's more evenly distributed rather than potentially sending many into poverty?

realitykeeper

Jawgap wrote: »

Except none of it carries a junk rating - even the short term money is well rated, not top tier, but way off a junk rating.

And if it's junk, why are the yields so low?

So, these bonds have not been given a junk rating by the same rating agencies that gave Ireland a AAA rating right before the economy imploded and the IMF were called in. Negative interest rates don`t even need a junk rating in order to be junk. Holders of these bonds are guaranteed to loose money.

realitykeeper

Jawgap wrote: »

So I take it you are shorting like crazy and taking advantage of the low gold (relative) price?

They say holding 10 to 15% of ones portfolio in gold is a good idea and I agree with that. I also agree that money should be used and not hoarded but one must be careful. If an economy spends a lot on benefits, bailouts and adopts protectionist policies, it is best avoided altogether. Buying negative yielding bonds so you will not loose too much when the economy implodes is just lazy. There is value to be had in economies based on real capitalism.

realitykeeper

Wanderer78 wrote: »

Maybe we need to change the systems that distribute wealth so that it's more evenly distributed rather than potentially sending many into poverty?

Rather than change wealth distribution, it would be better if systems were put in place so that the low paid would earn more, and that can be done. Forcing people to hand out charity will only cause them to move abroad.

Jawgap

realitykeeper wrote: »

So, these bonds have not been given a junk rating by the same rating agencies that gave Ireland a AAA rating right before the economy imploded and the IMF were called in. Negative interest rates don`t even need a junk rating in order to be junk. Holders of these bonds are guaranteed to loose money.

So you are rating the debt being issued as 'junk' - on what basis?

And yes, people are paying the NTMA to hold their money - maybe, as bonkers as it sounds, it's a vote of confidence in the NTMA and Ireland? They're happy to pay a small premium to keep their money safe.

And surely it was the decision to guarantee the banks that turned our debt to junk? Prior to that there was nothing inherently wrong with it.

Jawgap

realitykeeper wrote: »

They say holding 10 to 15% of ones portfolio in gold is a good idea and I agree with that. I also agree that money should be used and not hoarded but one must be careful. If an economy spends a lot on benefits, bailouts and adopts protectionist policies, it is best avoided altogether. Buying negative yielding bonds so you will not loose too much when the economy implodes is just lazy. There is value to be had in economies based on real capitalism.

Yes, but if you honestly believe we're months away from imploding then surely you'd be hoovering up all the gold you can get your hands on? Especially as gold seems a bit 'bearish' at the moment?

I believe in a diversified portfolio, but if I genuinely thought for one minute there was a killing to be made in a single asset class, I'd pile into it.

Btw, who is the 'they' - on the one want you seem to be eschewing conventional market wisdom, then on the other embracing it?

realitykeeper wrote: »

Rather than change wealth distribution, it would be better if systems were put in place so that the low paid would earn more, and that can be done. Forcing people to hand out charity will only cause them to move abroad.

How?

Surely, if wage cuts, per your previous posts, are cut discretionary spending falls off, people focus on saving and paying down debt.....so how would the low paid earn more?

If anything they'd earn less as more of them would be chasing a decreasing pool of money?

Seth Brundle

realitykeeper wrote: »

Rather than change wealth distribution, it would be better if systems were put in place so that the low paid would earn more, and that can be done. Forcing people to hand out charity will only cause them to move abroad.

Define low paid.

Anyhow, surely paying more to unskilled workers will mean that skilled workers will also want more meaning that even more skilled workers will want more?
You'd just be driving up wage inflation which in turn would drive up the cost of living, etc.

Owryan

realitykeeper wrote: »

Everyone need to take pay cuts, and what is wrong with ending poverty in the long term, are you suggesting the poor want to remain poor and making them rich is an act of genocide?

You wanted everyone but you to take pay cuts. And you wanted to end poverty by putting them into camps.

Hardly an inspiring idea

Chips Lovell

Thread locked, since we've already been here many times before.