Australia and Sweden Experiencing Rushes on Cheap Loans

24.05.2016 • Central Banks

From Strategy of Simone Wapler (FRANCE) –

The increase policy rates become clearer, the United States approaching the criteria of the Fed ( Prospect of rate rise grows as US moves closer to passing tests Fed ), Financial Times The German 10-year yields should move into negative territory in late 2016, Agefi Issuers extend the life of their debt, Les Echos Australia and Sweden concentrate the most important real estate risks, Agefi Hedge funds are betting against Australian banks ( Funds Bet Against Australia Banks) , The Wall Street Journal The G7 is far from unanimous on the restart, Le Figaro

 

** Articles on higher future Fed rate increase. As I explained Friday the evolution of the dollar against other currencies is one of the most important things (with the evolution of interest rates in euro) for your investments. Recall the previous episode. Mid-2014, the Fed talks about its first rate hike; The dollar begins to rise; Oil began to decline; In summer 2015, the equity markets and high-yield bonds are at the edge of the crash; China, Japan and Europe are embarking on new liquidity creation operations. The situation stabilizes For now, the dollar index shows no violent progression. We are at 96.29, slightly below the level which triggered panic in the summer 2015. But already we see that the weakest emerging market currencies drop out of the ground. ** Meanwhile, the rates are sinking into negative territory which is unbearable for insurers and pension funds.

 

** In terms of debt, that is racing to secure the duration of the loans at such low rates. The average duration of bonds is 8.6 years and the companies that issued 5 years now distributing securities to 7 or 10 years. The same goes for state bonds with 50 years … and we talk about 100 years! Accordingly cheap rates: Australia and Sweden are drowning in mortgage loans. ” The share of home loans in the total loans granted by banks to non-bank private sector increased on average since the great recession ‘, says the Oxford Economics Research Institute in a recent study. (…) Some countries border on overheating. Oxford Economics estimates that Australia, where the RBA has reactivated its easing cycle and could fuel the bubble, and Sweden, where the Riksbank is expected to raise rates and detonate, concentrate the most risk important. ” Agefi.

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