- 18 June 2004
It's the credit markets that are scary.
Not really .... other than issues I have with too much corporate debt and home loan debt but at 0.25% interest ?
1987 I think I shared the RBA basically swamped the market with cash. They ignored it .... instead of even the cash rate being 8.5% down from 11% ... on the 20th Oct ... it went UP ... not down and 3 months went up near 15% from 11.5% despite cash being swamped with liquidity 6 month rates went even higher ... USA of course did the same and the market responded correctly.
Nothing new .... just this time both markets ignoring the central bank which, actually is new for the USA but its happened here before. I back as always the central bank. Idiotic not to ... when they control liquidity and cash rates and if someone wants to pay 3% above cash, they just go ... ok here is 500 billion more ... of people wont lend to each other ... they just go ... well we lend to you ALL.
Famous last words being more confident on this. Central banks DON'T really control bond rates, the can influence them and shorter term ones more so. Having a 1 year short term bond at 3% and cash at zero is one hell of a reason to cash and carry the risk.
Enuf ... back pre 9 am ... Monday with USA numbers and if any action slowing the spread of stupidity .. in financial markets.