Fixed interest – Bobs Birdhouse http://bobsbirdhouse.com/ Thu, 23 Jun 2022 03:42:37 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://bobsbirdhouse.com/wp-content/uploads/2021/06/cropped-icon-32x32.png Fixed interest – Bobs Birdhouse http://bobsbirdhouse.com/ 32 32 Government raises 155 billion rupees via GDP auction https://bobsbirdhouse.com/government-raises-155-billion-rupees-via-gdp-auction/ Thu, 23 Jun 2022 01:00:00 +0000 https://bobsbirdhouse.com/government-raises-155-billion-rupees-via-gdp-auction/ KARACHI: The government raised 155 billion rupees on Wednesday from the auction of fixed-rate Pakistani investment bonds (GDPs), with yields falling on three- and five-year papers. The three-year GDP yield fell slightly by 3 basis points (bps) to 13.97%, the outcome of the SBP GDP auction showed. The five-year paper yield lost 1 basis point […]]]>

KARACHI: The government raised 155 billion rupees on Wednesday from the auction of fixed-rate Pakistani investment bonds (GDPs), with yields falling on three- and five-year papers.

The three-year GDP yield fell slightly by 3 basis points (bps) to 13.97%, the outcome of the SBP GDP auction showed. The five-year paper yield lost 1 basis point to 13.18%. The 10-year paper yield remained unchanged at 13.15%.

Bids were rejected for the 15-year papers. Bids have not been received for 20 and 30 year old items. GDP yields were expected to fall in the coming weeks, following a drop in Treasury bond rates at an auction held on June 15.

The SBP frequently conducts a 63-day open market operation (OMO) to bring stability to the secondary market. Budget 2022-23 proposed that the tax rate on interest income from government securities from banks with an advances on deposits ratio (ADR) of 50% or more be raised to 45% from 35%.

For banks with an ADR of 40-50%, the rate was increased to 49% from 37.5%, and for banks with an ADR below 40%; it is increased to 55 percent.

The implementation of said increase in tax rates on certain ADR thresholds would apply retrospectively from 2021 (Tax Year 2022 onwards). This would likely lead to a higher effective tax rate of around 53% in 2022 and level off at 48% in 2023. led to higher secondary market yields on government securities at previous auctions.

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Australian stocks rebound; RBA Governor Warns of Higher Interest Rates; Westpac $750 million Tier 1; Distribution of 14.6¢ from Stockland; The Dutch are reopening the doors to coal energy; the oil rebounds; $A firmer. https://bobsbirdhouse.com/australian-stocks-rebound-rba-governor-warns-of-higher-interest-rates-westpac-750-million-tier-1-distribution-of-14-6%c2%a2-from-stockland-the-dutch-are-reopening-the-doors-to-coal-energy-t/ Tue, 21 Jun 2022 06:19:00 +0000 https://bobsbirdhouse.com/australian-stocks-rebound-rba-governor-warns-of-higher-interest-rates-westpac-750-million-tier-1-distribution-of-14-6%c2%a2-from-stockland-the-dutch-are-reopening-the-doors-to-coal-energy-t/ Economists hailed the Reserve Bank’s mea culpa over its controversial yield curve control that resulted in chaos and damaged the central bank’s credibility. Bob Cunneen, chief economist at MLC Asset Management, said it is healthy for a central bank to concede mistakes and would “strengthen its scenario analysis”. But he remained critical of the central […]]]>

Economists hailed the Reserve Bank’s mea culpa over its controversial yield curve control that resulted in chaos and damaged the central bank’s credibility.

Bob Cunneen, chief economist at MLC Asset Management, said it is healthy for a central bank to concede mistakes and would “strengthen its scenario analysis”. But he remained critical of the central bank for allowing some mortgage borrowers to stretch their finances and take on more debt due to artificially low fixed interest rates.

“When these fixed rates come due in the next couple of years, there will be a damaging crisis for these borrowers and only when we realize what a major mistake the RBA’s yield target was,” he said. he declared.

Tony Morriss, head of Australian economics and rates strategy at Bank of America, said he was still struggling to reconcile the fact that the central bank had not fully considered the exit strategy of the yield curve. He remained puzzled as to why the central bank failed to communicate with the market when it decided to withdraw from the target defense.

Su-Lin Ong, an economist at RBC Capital Markets, questioned whether controlling the yield curve was worth it across the board. “It may have been helpful early on, certainly not later, and the ‘reputational damage’ probably precludes it from being credible if adopted again,” she said. “Clearly quantitative easing is a more effective and preferred tool that will be rolled out again if needed.”

The Reserve Bank introduced yield curve control at the start of the COVID-19 pandemic when financial markets panicked and the bond market froze. It was a promise to keep rates at a record low of 0.1% until 2024 by fixing the rate on three-year government bonds at the same level, reassuring borrowers that interest rates would stay low.

But at the end of last year, bond markets revolted, pushing the April 2024 bond yield to 0.8% as rising inflation forced the central bank to raise interest rates. much earlier than expected.

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Will interest rate hikes continue to drive down gold prices? https://bobsbirdhouse.com/will-interest-rate-hikes-continue-to-drive-down-gold-prices/ Fri, 17 Jun 2022 14:58:47 +0000 https://bobsbirdhouse.com/will-interest-rate-hikes-continue-to-drive-down-gold-prices/ Global_Intergold /Pixabay With so many variables in play when it comes to predicting the price of gold, interest rates are another hurdle for potential investors to jump through, and it’s no surprise that many seem to be panicking in case of change. In recent days, gold prices have also started to cool, coming off their […]]]>
Global_Intergold /Pixabay

With so many variables in play when it comes to predicting the price of gold, interest rates are another hurdle for potential investors to jump through, and it’s no surprise that many seem to be panicking in case of change.

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In recent days, gold prices have also started to cool, coming off their highest level in five weeks and registering the highest average daily price increases. The hawkish market conditions and mixed increase in federal interest rates leave gold buyers and traders at an undesirable crossroads.

Conditions for gold and other precious metals have been swinging over the past few months as 2022 looks set to be a banner year, being both good and bad news. For new buyers and traders of gold in the market, familiarize themselves with the golden ira basics is no easy task, but hyper-growth and interest from a cohort of investors is dramatically changing the landscape.

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Well, thankfully, the link between interest rates and gold has been studied rigorously, and we can now have a pretty good idea of ​​what we might see next. Let’s dive straight into the nitty-gritty and discuss whether or not interest rate hikes will continue to drive down gold prices.

A sought-after phenomenon

The correlation between gold and interest rates is well documented. In almost all situations, whenever interest rates rise, the price of gold falls. Alternatively, each time interest rates fall, the price of gold rises exponentially.

This has happened countless times since the inception of stock markets, and while we can never be sure what the future holds, it seems the correlation between gold and interest rates is one of the few things we can predict with near certainty. .

This is due to a plethora of reasons, some of which we will discuss in the next section of this article. However, when it comes to whether or not rising interest rates will continue to drive down the price of gold, the answer is a resounding yes.

Makes other investments more attractive

One of the main causes of the fall in the price of gold when interest rates rise is simply the fact that other investments become more attractive. It makes sense for investors to take some of their gold and sell in favor of fixed interest rate assets, and that’s exactly why so many people choose to do just that.

Of course, this does not mean that investors choose to sell their gold altogether – such a thing would be detrimental. However, taking a small portion of your portfolio and investing it in fixed interest rate assets can be an incredibly smart move when interest rates rise, and it’s just one of the many reasons why the Gold tends to suffer in similar situations.

Favorable Gold Stocks in Volatile Conditions

Although there seems to be a sea of ​​uncertainty ahead of us, investors tend to share the urge to move from gold to equities under adverse conditions.

In these situations, it’s hard to say which will provide better security, and while it’s true that precious metals such as gold and other natural minerals traded can help hedge wild price swings and trading conditions. volatile market.

While some investors share the common sentiment of seeing gold as an outdated trade or addition to a portfolio, gold stocks might opt ​​for a safer option in markets that are constantly buffeted by major political and governmental headwinds.

What to know about trading gold stocks or researching to buy shares in a gold company or producer, seasoned professionals suggest that investors spend a lot of time researching and understanding the the ins and outs of the market and company they are looking for. to buy shares of.

Trusted names such as Barrick Gold Corporation (NYSE: GOLD), Gold Field Ltd (NYSE: GFI), and Wheaton Precious Metals (NYSE: WPM) are among the largest gold mining companies and producers in the world.

Much like physical gold, the companies behind the mining and refining process could also see selloffs or dips if market sentiment begins to decline.

Perhaps the most rewarding aspect of buying gold and gold stocks is that while market volatility may rise, the value will never completely bottom out.

This could mean that in a scenario where investors are on a sell-off path, gold and other precious metals could retain their value and remain a valuable asset – the same for those who carry it as an offer or service.

Alternative scenarios for gold

In alternative scenarios, there could perhaps be a change in the pace of performance for gold. The strengthening of the dollar and falling bond yields can also play a role in the value of gold in the market.

The more the Feds introduce high and frequent short-term interest rates, the faster the gold standard rises in the market. In these cases, it would seem that holding gold could become a more lucrative asset than having shares in gold mining companies.

Gold is also changing, not physically, but perhaps more virtually. Gold has evolved from a natural commodity to a virtual commodity that many investors can now purchase using a smartphone app such as DigiGold.

The digitization of gold means that it is now more accessible to buyers from different economic backgrounds. Second, gold as a digital asset makes it easy to trade and sell at the right time.

The gold standard is constantly changing, and if you consider how diverse gold has become, it’s now easy to see why its perhaps antiquated value still attracts investors and buyers.

Gold will always be the cornerstone of any professional portfolio

At first glance, you might be a little worried if you have already chosen to invest in gold or are planning to do so in the short term after reading the two sections above. Well, that’s quite useless.

Then there’s the annualized return for gold, and under current market conditions, it looks like gold is in for another one-year run. Over the past three decades, gold has provided an annualized return of 10%, and in today’s market, the annualized return is 11%.

But these indicators can only become a valuable measure when talking about long-term gold. Annualized return can be a difficult path to follow if you are an investor who is willing to take risks, but still keeps options available and buys loose in a tight market.

Gold is one of the few assets with intrinsic value and due to its high demand but low supply, gold always rebounds as soon as interest rates start to stabilize. Sure, gold can be quite volatile in the short term, but when it comes to long-term consistency, gold reigns supreme and will always be the cornerstone of any professional investor’s portfolio.

Some Final Thoughts

Gold has a long history and is perhaps a more suitable choice for investors who have a plan of action and a trading strategy. Gold is also much less likely to see big swings during a sudden market drop – but that may be the fact that its value is tied to rising demand and weak supply. .

Eventually, gold prices will return to normal as they always do, and this recent dip is almost guaranteed to be just a fad. Gold is perhaps one of the best first purchases an investor can make, especially if they are looking to minimize their long-term risk.

Apart from the fact that gold has a sense of security to buy, it is also much easier these days to gain access to the market. Any type of investor now has the opportunity to own some form of gold, and in a tight market, it may just be a perfect fit for your portfolio.

Updated

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Bank of England set to hike rates again as inflation heads towards 10% https://bobsbirdhouse.com/bank-of-england-set-to-hike-rates-again-as-inflation-heads-towards-10/ Wed, 15 Jun 2022 23:09:00 +0000 https://bobsbirdhouse.com/bank-of-england-set-to-hike-rates-again-as-inflation-heads-towards-10/ The Bank of England (BoE) building is reflected in a sign, London, Britain, December 16, 2021. REUTERS/Toby Melville/ Join now for FREE unlimited access to Reuters.com Register BoE set to hike rates for 5th time since December Most investors expect another quarter-point rise Nearly 50% chance of a bigger half-point hike, depending on the markets […]]]>

The Bank of England (BoE) building is reflected in a sign, London, Britain, December 16, 2021. REUTERS/Toby Melville/

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  • BoE set to hike rates for 5th time since December
  • Most investors expect another quarter-point rise
  • Nearly 50% chance of a bigger half-point hike, depending on the markets
  • The BoE torn between soaring inflation and slowing growth
  • Announcement scheduled for 11:00 GMT

LONDON, June 16 (Reuters) – The Bank of England appears set to ignore concerns about a sharp slowdown in Britain’s economy and raise interest rates again on Thursday as it tries to fight a rising interest rate. double-digit inflation.

After the US Federal Reserve raised borrowing costs the most since 1994 with a 75 basis point rate hike on Wednesday, the big question for investors awaiting the BoE’s policy announcement in June at 11:00 a.m. GMT is the magnitude of the increase.

Financial markets are fully pricing in a quarter percentage point increase in the Bank Rate to 1.25%.

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But investors put a nearly 50% chance of a BoE half-point hike, something it hadn’t done since 1995.

The BoE has already raised borrowing costs four times since December, when it became the first of the world’s major central banks to hike rates after the coronavirus pandemic.

Britain, more than many other rich countries, faces a mixture of high inflation and no growth or recession.

Its economy is already showing signs of slowing and next year will be the weakest of the world’s major rich countries, according to forecasts by the International Monetary Fund and the Organization for Economic Co-operation and Development.

But inflation, which hit a 40-year high of 9% in April, is expected to top 10% later this year, more than five times the BoE’s 2% target, according to the central bank’s latest forecast. .

These forecasts could still prove too low after a recent fall in the value of the pound which will add to the cost of imports, mainly oil and gas.

“Britain is stuck in the worst of both worlds and that’s what makes policymaking so difficult,” said Luke Bartholomew, senior economist at investment firm abrdn.

“There is still a tricky period ahead with soaring inflation and slowing growth.”

Part of Britain’s inflation problem is the country’s mechanism for regulating domestic electricity prices, which means that rising prices are likely to last longer than elsewhere.

Britain is also suffering from a severe shortage of workers to fill vacancies, which is driving up wages for some and could fuel the fire of inflation.

Then there is the unfinished business of Brexit. Britain and the European Union are at odds again, which could lead to higher trade barriers with the bloc and higher prices.

The BoE is likely to signal again on Thursday that its slew of rate hikes will continue, although last month it suggested investors were going too far by setting the bank rate at 2.5% by March. middle of next year.

Since then, those bets on rising rates have risen again, with markets pricing the discount rate near 3% as early as December.

The rise is partly due to expectations of more government aid for the cost of living after Finance Minister Rishi Sunak announced new support in May and Prime Minister Boris Johnson sought ways to bolster his popularity falling.

David Zahn, head of European fixed income at Franklin Templeton, said yields on short-term UK government bonds probably only had a little more room to rise.

“I think we’re getting very close to the inflection point where the central bank will probably have to stop walking,” he said. “The Bank of England might do one or two more (rate hikes), but I think we will be in recession later this year in the UK.”

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Additional reporting by Dhara Ranasinghe

Our standards: The Thomson Reuters Trust Principles.

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SBI FD interest rates: SBI raises FD interest rates by up to 20 bps for these maturities https://bobsbirdhouse.com/sbi-fd-interest-rates-sbi-raises-fd-interest-rates-by-up-to-20-bps-for-these-maturities/ Tue, 14 Jun 2022 04:37:00 +0000 https://bobsbirdhouse.com/sbi-fd-interest-rates-sbi-raises-fd-interest-rates-by-up-to-20-bps-for-these-maturities/ The State Bank of India (SBI) has raised interest rates on fixed deposits (FD) over certain tenors by up to 20 basis points (bps), effective June 14, 2022 for deposits below Rs 2 crore According to the SBI website, the bank raised the interest rate on FDs with maturities ranging from 211 days to less […]]]>
The State Bank of India (SBI) has raised interest rates on fixed deposits (FD) over certain tenors by up to 20 basis points (bps), effective June 14, 2022 for deposits below Rs 2 crore

According to the SBI website, the bank raised the interest rate on FDs with maturities ranging from 211 days to less than one year by 20 basis points to 4.60%. For 1 year to less than 2 years, the interest rate offered was increased to 5.30% from 5.10%. And the interest rate was raised by 15 basis points on 2 years to less than 3 years FD to 5.35% against 5.20%

Latest SBI FD Interest Rates

Source: SBI website

Senior FD

The rate applicable to all SBI seniors and retirees aged 60 and above will be 0.50% higher than the rate applicable to senior Indian residents for all ages.

Seniors will earn 5.10% for terms ranging from 211 days to less than a year. The bank will offer 5.80% over 1 year to less than 2 years. From 2 years to less than 3 years, it will offer 5.85% after the ride.

Banks offering the highest interest rates on 2-year senior FDs

RBI raises its repo rate

The repo rate has now been raised by 0.50% by the RBI at its monetary policy meeting on June 8, 2022, bringing the total hike to 0.9% in just 36 days. This evidently indicates that the best days have now arrived for fixed deposit (FD) investors, who have seen FD interest rates fall by 40% over the past six years from the all-time high of 9% offered by SBI in September 2014 to 5.4%. in May 2020.

Suggested interest rates will apply to new deposits as well as renewals of maturing deposits. Interest rates on retail deposits and NRO deposits under the “SBI Tax Savings Scheme 2006(SBITSS)” would be tied to projected rates for domestic retail term deposits.

The SBI had last raised FD interest rates in February 2022. Effective 15 February 2022, the SBI had raised interest rates for FD tenors of more than two years by 10 to 15 basis points basic.

Good news for FD investors

The Reserve Bank of India (RBI) raised repo rates by 50 basis points at its monetary policy meeting on June 8, 2022. This brings the total rate hike by the central bank to 90 basis points in just over one month. More banks are expected to raise FD rates in the coming months, which is good news for FD investors.

These banks offer the highest interest rates on 5-year FDs

What is an FD?

A fixed deposit, often referred to as FD, is a type of investment instrument offered by banks and non-bank financial institutions (NBFCs). You invest for a certain period of time and also receive a fixed rate of interest with FDs, you will also receive fixed returns regardless of how interest rates fluctuate or how the economy performs at the time of the investment. investment.

How to adjust your FD scale in the current situation

Doing an FD ladder is an option as it helps you to split a large deposit into multiple parts and reserve each part after a time interval to get the average return and periodic liquidity in case of interest rate volatility. However, it is important to choose the right tenure and deposit frequency. In a rising rate scenario, it is essential to keep the duration and the spread between the deposits low so that the deposit benefits quickly from the rising rates at maturity. These can be gradually increased to complete a stable scale.

For example, if you have Rs 10 lakh, you can make the first FD of Rs 2.5 lakh for six months, then a second FD of Rs 2.5 lakh for 9 months and so on. Once your first FD matures you can increase the tenure to 2 years and after that once the second FD matures you can keep the tenure 2 years 3 months and so on. Once these FDs start to mature, you increase the tenure to 3 years and increase the gap between the two FDs to 9 months.

Create an FD ladder to maximize returns from rising interest rates

Create an FD ladder to maximize returns from rising interest rates

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What are a best buy? https://bobsbirdhouse.com/what-are-a-best-buy/ Sun, 12 Jun 2022 15:06:18 +0000 https://bobsbirdhouse.com/what-are-a-best-buy/ The CPI-linked savings bond isn’t all it’s made out to be. TIPS offer slightly better protection against inflation. Thief in the Night (Photo by Mark Wilson) Getty Images Personal finance experts love these bonds I. Suze Orman: “The #1 investment every one of you should have no matter what.” Burton Malkiel: “Absolutely superb.” Last month, […]]]>

The CPI-linked savings bond isn’t all it’s made out to be. TIPS offer slightly better protection against inflation.

Personal finance experts love these bonds I. Suze Orman: “The #1 investment every one of you should have no matter what.” Burton Malkiel: “Absolutely superb.” Last month, a stampede for these things crashed the TreasuryDirect website.

Contrarian view: I bonds are absolutely mediocre. They pay less than marketable treasuries, they clutter up your retirement portfolio, and they’re guaranteed to make you poorer.

The rout will no doubt continue given the unpleasant surprise (8.6%) of the latest inflation report. Bonds are indeed a better deal for long-term savers than any bank account. But they are not doing what their holders want them to do, which is to immunize savings against the fall of the dollar.

I bonds are savings bonds that pay a fixed interest rate plus a semi-annual adjustment pegged to the consumer price index. You buy these bonds after linking a bank account to the clumsy Treasury website. The maximum purchase per calendar year is $10,000 per person ($20,000 for a couple). Bonds cannot be redeemed during their first 12 months; from then until the 60 month mark, a redemption comes with the loss of three months interest.

After five years, an I bond can be redeemed without penalty. The buyer has the option of deferring taxation until the bond is cashed or matures, and that’s usually a smart thing to do. Upon maturity in 30 years, the bond ceases to earn interest. Interest on I bonds, like all US government debt, is exempt from state income tax.

The fixed rate on an I bond purchased today is 0% for the life of the bond. The inflation adjustment changes every six months and now generates an annualized rate of 9.62%. In other words, if you invest $10,000 now, you will be credited $481 in interest for your first semester.

In an era of shitty bank yields, a $481 semi-annual coupon looks pretty good. But the fixed rate of 0% means that, after deducting inflation, you earn nothing. Moreover, even if you tread water in terms of purchasing power, you will eventually have to pay tax on your putative interest. Take this tax into account and you will find that your actual return is negative.

Hypothetical example: you are in the 24% bracket, your principal balance is $10,000 and inflation is 10%. After a year, you have a balance of $11,000 but owe $240 in taxes, to be paid now or later. The $10,760 you own buys less than $10,000 the previous year.

Understand what is happening. The government is in deficit. It covers this partly by printing money to distribute and partly by borrowing from savers. Savers are getting poorer year after year. Note that the tax collector and the borrower are the same entity, the US Treasury.

It’s raw business. You can do better, a little better, by buying Treasury inflation-protected securities, aka TIPS. TIPS due in ten years pay an actual yield of just 0.4% and those due in 30 years pay an actual yield of just 0.7%. Buyers of TIPS must pay immediate tax on both their actual yield and their annual inflation allowances.

You can buy TIPS directly from the Treasury at one of its periodic auctions, buy them used from a broker or, preferably for smaller sums, buy shares in a low-cost fund like the Schwab US TIPS ETF. TIPS also offer a negative real after-tax return, but it is not as negative as the return on I bonds.

The grim results are plotted in the two graphs below. The first chart assumes inflation starts high – 8% in the first year, 5% in the second – then drops to a low level that brings the 30-year average back in line with bond market expectations.

Other assumptions: the buyer is in a moderately high tax bracket, takes advantage of the tax deferral option available on the I bond and opts for a 30-year maturity when buying TIPS.

In this scenario, Bond I’s tax deferral is worth something, but it’s not enough to overcome the 0.7% yield advantage enjoyed by TIPS.

What if inflation accelerated? The second chart assumes two percentage points higher inflation over the next 30 years than is priced into the bond market.

Here, the tax deferral allows the I bonds, at the end of a long holding period, to be linked to the tradable TIPS. But that doesn’t mean an I bondholder should pray for high inflation. Higher inflation means more phantom income to tax. With higher inflation, the depletion of wealth occurs faster.

In addition to the tax deferral, the savings bond has another advantage: it comes with a free put option. You don’t have to hold your investment for the full 30-year term. At any time after five years, you can surrender the bond for principal plus accrued interest.

If real interest rates rise, this option will be worth something. You can cash in the I bond, pay taxes on the interest, and use the proceeds to buy long-term TIPS paying better than the current 0.7%.

But now let’s look at the main drawback of I bonds. They are only available in small doses. If a $10,000 bond is a big chunk of your net worth, it doesn’t matter. But if it’s a small item in a retirement portfolio, it will create financial clutter.

You are allowed to buy an additional $5,000 per year of I bonds if you overpay your income tax and receive the refund in the form of a paper savings bond. It’s more cumbersome. Avoid it.

I Bonds cannot be held with other assets at your broker. You must maintain a separate TreasuryDirect account, with its own login and password. Is there a chance that you or your heirs will lose track of this asset within the next 30 years? Think about it. Take note that the Treasury is sitting on $29 billion in matured and unclaimed paper savings bonds.

Choose your poison. Whatever the bond, the US Treasury will make you poorer when you lend it money. The I bond definitely beats bank CDs for long-term savings, but for successful investors tradable TIPS probably make more sense.

We are talking here about newly acquired bonds. If you’re lucky enough to have bought I bonds years ago when the fixed rate rose above 3%, hold onto them until they mature.

The charts of after-tax bond values ​​assume an investor who is in the 24% bracket today and will rise to 33% when the 2017 tax law expires in early 2026; these rates would apply to a married couple now declaring taxable income of $250,000. The bond market’s assumption for future inflation is the difference in yield between nominal and real bonds, minus a 0.1% provision for a risk premium on nominal bonds.

To find out more about the I bonds:

Tips is a useful reference site.

US Treasury Compares TIPS to I Bonds here.

The Danger With These Savings Bonds: Lost and Found Department is a warning.

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Mortgage ‘cliff’ looms for homeowners as fixed-rate loans end https://bobsbirdhouse.com/mortgage-cliff-looms-for-homeowners-as-fixed-rate-loans-end/ Fri, 10 Jun 2022 19:00:00 +0000 https://bobsbirdhouse.com/mortgage-cliff-looms-for-homeowners-as-fixed-rate-loans-end/ When their fixed rate ends in July 2023, RateCity calculated that they would face an average ‘return’ rate of 5.68%, based on Westpac’s forecast for the official cash rate, which would see refunds increase by $937 per month. Even on the lowest estimated variable rate of 4.42%, monthly repayments would increase by $600. Westpac expects […]]]>

When their fixed rate ends in July 2023, RateCity calculated that they would face an average ‘return’ rate of 5.68%, based on Westpac’s forecast for the official cash rate, which would see refunds increase by $937 per month. Even on the lowest estimated variable rate of 4.42%, monthly repayments would increase by $600.

Westpac expects the spot rate, currently at 0.85%, to peak at 2.35% by February, while financial markets predict it could reach 3% by year-end.

Grattan Institute economic policy program director Brendan Coates said people who had only recently purchased property would quickly cut back on spending in the face of higher interest rates, whether they were on mortgages at variable or fixed rate. This is partly because the amount of loans relative to income has increased dramatically over the past 30 years.

In April, the average mortgage was $611,000 nationally, according to data from the Australian Bureau of Statistics. In April 2012 the average loan was $350,000 and in 2004 it was $237,000.

“Buying a house in the early 1990s would certainly cost, say, three times the average income. And now it’s costing you something more than eight times, and that means, by its very nature, people are borrowing a lot more,” Coates said. “Therefore, it doesn’t take such a large increase in interest rates on this much larger loan for the mortgage to represent a significant portion of the borrower’s income.”

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But Coates added that the people who bought during the pandemic were a minority of mortgage holders.

“COVID has been a very different experience for these two different groups of borrowers,” he said. “If you bought some time ago, you’ve spent the last three years with lower interest rates than you bought, only paying off a good portion of the mortgage.”

After the Reserve Bank’s biggest one-time interest rate hike in 22 years this week, ABC economists predicted property values ​​could fall by up to 20% until the end of next year, which would bring the market closer to pre-pandemic values.

Coates said falling house prices made people feel poorer, which in turn reduced household spending.

“So that’s the main channel through which you could actually reduce household spending because they feel poor because their house has lost value,” he said.

While those with variable home loans would also see rate hikes, Tindall said their increase in mortgage costs would be more gradual. His concern is whether people were prepared for a rate hike shock.

“Sit down and figure out what your interest rate will be, but also what your monthly repayment will be,” she said. “If it doesn’t fit your current budget, start making changes to that budget now, so you can be prepared.”

Cut through the noise of federal politics with news, opinion and expert analysis from Jacqueline Maley. Subscribers can sign up for our weekly Inside Politics newsletter here.

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Even 3% yields can’t attract wary Treasury investors https://bobsbirdhouse.com/even-3-yields-cant-attract-wary-treasury-investors/ Thu, 09 Jun 2022 07:28:13 +0000 https://bobsbirdhouse.com/even-3-yields-cant-attract-wary-treasury-investors/ Placeholder while loading article actions For much of the past decade, US bond investors lamented the ultra-low yields on government securities. Today, the highest inflation in 40 years pushed ‘income’ back into ‘fixed income’ as yields fell the most on record and yields jumped. What investors need to decide now is whether getting back into […]]]>
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For much of the past decade, US bond investors lamented the ultra-low yields on government securities. Today, the highest inflation in 40 years pushed ‘income’ back into ‘fixed income’ as yields fell the most on record and yields jumped. What investors need to decide now is whether getting back into the beleaguered asset class is a timely move or an invitation to grab a falling knife.

Caution is in order and for good reason. Traders who thought Treasury yields peaked last month, with two-year notes yielding around 2.78%, are seeing them take another run at those highs, and the 10-year note has cracked again 3% this week. Investors at the reopening of 10-year Treasury bonds on Wednesday – the highest yield since 2018 – offered lukewarm demand. They submitted offers for 2.41 times the amount offered, which was lower than the average of 2.5 times over the past six reopenings. Fixed income funds recorded significant outflows throughout the year. Jim Vogel, an analyst at FHN Financial, wrote that the auction went “with an obvious lack of enthusiasm” that echoed another auction earlier this week.

Markets are still trying to determine how much the Federal Reserve is willing to raise the fed funds rate as it tries to keep inflation from taking root in the US economy, and attention has turned. to the report on the consumer price index which should be published. Friday. Economists polled by Bloomberg forecast consumer prices rose 8.2% in May from the month a year earlier, still near the highest since the 1980s. Inflation may have hit a peak, but the downward slope is far from steep enough to reassure the central bank. the inflationary stick to the service sector of the economy. The cross-currents can be dizzying for investors and economists, who agree that the Fed will raise interest rates through the summer, but are beginning to differ sharply on what they think the central bank will do in the fall, when the economy may have slowed considerably. With inflation as high as it is, bonds yielding between 2.5% and 3% may still seem like meager compensation. These coupon payments will likely buy fewer groceries next year than they do today.

On the other hand, no one expects inflation to stay this high forever, which can make buying and holding long-term bonds attractive. Exchange-traded fund investors began returning to mid- to long-term US government bond funds in early May when it looked like yields had peaked, but they appear to have fallen back recently. as it became less clear that yields had plateaued. .

The debate is not whether inflation will stay above 8% for the foreseeable future, but how fast it will fall and whether the economy is ready for future peaks. Supply chains remain somewhat blocked, but have improved. Energy prices are high, but they never stay high forever.

This does not necessarily mean that short-term bond yields are back below the 0.5% level that prevailed in the decade following the financial crisis. There are also longer-term opposing forces, with prognosticators fearing that the war in Ukraine and the pandemic supply chain experiment are among a confluence of factors that will reverse globalization, prompting developed countries to produce goods. potentially more expensive closer to home. Others predict that the transition to clean energy will entail higher costs, at least initially, as society invests in new products and infrastructure.

Yet interest rates have been on a clear downward path for decades – even centuries, according to economic historians – and history suggests they will settle much lower than they are today. today. For long-term investors, long-term bonds can be a worthwhile investment. It’s mostly a question of whether other investors have the confidence to risk a notch or two.

More other writers at Bloomberg Opinion:

• Beware of a bear market that is more than a bear cub: Nir Kaissar

• Inflation’s ‘fun’ period was far too short: Jared Dillian

• Today’s pensions don’t favor Millennials and Gen Z: Erin Lowry

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Jonathan Levin has worked as a Bloomberg reporter in Latin America and the United States, covering finance, markets, and mergers and acquisitions. Most recently, he served as the company’s Miami office manager. He holds the CFA charter.

More stories like this are available at bloomberg.com/opinion

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Fixed mortgage rates are rising https://bobsbirdhouse.com/fixed-mortgage-rates-are-rising/ Tue, 07 Jun 2022 05:22:00 +0000 https://bobsbirdhouse.com/fixed-mortgage-rates-are-rising/ ANZ raises its fixed mortgage rates to the highest in the current mortgage market, supported by higher key rates which are pushing wholesale rates higher ANZ has increased its fixed rate offerings for all terms to three years. Their new one-year rate is up +30 basis points to 4.85%, a level that matches Kiwibank’s recent […]]]>

ANZ raises its fixed mortgage rates to the highest in the current mortgage market, supported by higher key rates which are pushing wholesale rates higher

ANZ has increased its fixed rate offerings for all terms to three years.

Their new one-year rate is up +30 basis points to 4.85%, a level that matches Kiwibank’s recent change.

Their two-year fixed rate is up +10 basis points to 5.35%, and their three-year rate is up a similar +10 basis points to 5.65%. At these levels, these are all the highest “specials” in today’s home loan market.

And they’re likely signaling where their main rivals will be moving soon.

ANZ is New Zealand’s largest property lender, in fact our largest bank.

The move was advised minutes after the Reserve Bank of Australia surprised markets with an official rate hike of +50 bps. It was one more than expected. look at this.

The RBA’s decision will increase wholesale rates regionally, including for New Zealand. The RBA’s decision came after the wholesale rate markets closed here today.

Wholesale swap rates have trended higher recently, but that’s after they detoured international trends, a drop that most banks didn’t follow with fixed rate cuts. at the time.

Internationally, signals from the central bank indicate that strong rate hikes are coming from most reviews last September, so wholesale markets are pricing them in and that may well have a strong influence on the levels of the local interest rate swap market.

ANZ also raised its term deposit rate offers, between +10 bps and +30 bps. Their new 6-month rate becomes 2.50% and their new 1-year rate becomes 3.15%. But unlike others, ANZ still doesn’t have a term deposit offer of 4% or more.

A helpful way to make sense of these home loan rate changes is to use our full function mortgage calculator which is also below. (Term deposit rates can be estimated using this calculator).

And if you already have a fixed-term mortgage that is not up for renewal right now, our break cost calculator can help you assess your options. But break fees should be minimal in a rising market.

Here is the updated overview of the lowest advertised fixed term mortgage rates currently offered by major retail banks.

Select chart tabs


Select chart tabs


Complete Mortgage Calculator

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10-step program to navigate these choppy investment waters – Saratogian https://bobsbirdhouse.com/10-step-program-to-navigate-these-choppy-investment-waters-saratogian/ Sun, 05 Jun 2022 15:22:12 +0000 https://bobsbirdhouse.com/10-step-program-to-navigate-these-choppy-investment-waters-saratogian/ Just as it is beneficial to establish an escape route from your home in the event of a fire, it is beneficial to establish a disciplined plan of action regarding your investments, while keeping in mind that panic does not is not a strategy. With that in mind, we thought it was time to provide […]]]>

Just as it is beneficial to establish an escape route from your home in the event of a fire, it is beneficial to establish a disciplined plan of action regarding your investments, while keeping in mind that panic does not is not a strategy.

With that in mind, we thought it was time to provide a ten-step program that could help you navigate these turbulent investing waters.

Step 1. Assess your current financial situation. Items should include your income, perceived job security, details of your retirement plan, projected social security benefits, insurance (life, health, disability, property and accident), real estate values, information on mortgages and other debts.

Step 2. Get a historical perspective on this period of history. Is it really different this time or are we in a phase of our history that will pass? Keep in mind that the stock market typically rises over a full business cycle (five to ten year period) with contained mini bulls and bears within it, then moves sideways over the next period with mini bulls and bearish in between.

Until further notice and most likely until monetary policy becomes significantly tighter, despite the dramatic pullback in March and April, we believe the equity market remains on an uptrend.

Step 3. Given the above, start determining your appropriate asset allocation. Some rules of thumb include that the older you are, the more fixed income securities (bonds) you should include in your portfolio. The more secure your retirement plan is, the closer you are to realizing the benefits of that plan, and how well that retirement plan and Social Security will meet your retirement income needs, the more to include. stocks (stocks) in his portfolio.

The more you are inclined to make emotional investment decisions, the more you should include fixed income investments. Keep in mind that the opposites of the above are also true and we are only talking about generalizations.

Step 4. Sell peripheral interests. Get out of investments you don’t understand or investments that contain volatility beyond your temperament. These may include, but are not limited to, emerging market funds, aggressive growth funds, lower quality (junk) bonds and small cap stocks. If a lack of risk tolerance is a problem, sell it so you can sleep at night.

Step 5. Hold some money. Depending on your situation, we estimate that between zero and twenty-five percent of your account is appropriate. Too little and you risk panic selling. Too much and you’re not making progress toward your long-term goals.

Step 6. Buy dividend-paying stocks. Do you realize that the 10-year US Treasury yields around 1.62% and the Proctor and Gamble stock yields 2.56%? Moreover, interest rates are at fifty-year lows and P&G has not only paid, but increased its dividend every year for the past sixty years. With that in mind and assuming that P&G does NOT increase or decrease its dividend over the next 10 years, if the stock drops 25% over that period, you will still make some money. A pool of these stocks seems like a better alternative for long-term investors than zero percent sitting in your bank account.

Step 7. Recognize that too many investors have their finger on the sell trigger and too many investors have guns – in the form of their computer. Try to figure out if you might be one of those people who doesn’t have the temperament or the time to invest on your own. There’s an old adage that goes, “Just because you can afford the ticket doesn’t mean you can fly.” Simply put, yes, it’s your money, but maybe your time, talent, and temper are better spent elsewhere.

Step 8. Be disciplined. Don’t chase the stock market day by day thinking you missed the mark. There will be many more boats to come. The volatility will continue. Be patient and let the scholarship come to you. What a new idea, buy on low days.

Step 9. Gain perspective. We are in our fifties. If the stats are true, that means we only have about 20 summers to enjoy it. All you can do is do your best and work towards your goals. It’s a bit like dieting and exercising, it’s your best bet, but it doesn’t promise anything.

Step 10. Become an investor, not a day trader. The media wants you to act, act, act, still screaming fire in a crowded room. Think about the previous nine steps to take a step back. Buy low, sell high. It sounds easy but is rarely accomplished by retailers as they often fear their investments at the wrong time. If history is any guide, that’s what will keep you from achieving your goals.

Please note that all data is for general information purposes only and does not constitute specific recommendations. The opinions of the authors do not constitute a recommendation to buy or sell the stocks, the bond market or any security contained therein. Securities involve risk and fluctuations in principal will occur. Please research any investment thoroughly before committing any money or consult your financial advisor. Please note that Fagan Associates, Inc. or related persons buy or sell securities for themselves which they also recommend to their clients. Consult your financial advisor before making any changes to your portfolio. To contact Fagan Associates, please call (518) 279-1044.

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