QuoteOriginally posted by: list1outrun, can you be more specific or quantify your statement "The negative yields are perfectly ok if you factor in credit risk and liquidity"price + lf + cf + of > 100lf = liquidity factorcf = credit factorof = option to convert to New Deutschemark

QuoteOriginally posted by: daveangelQuoteOriginally posted by: list1outrun, can you be more specific or quantify your statement "The negative yields are perfectly ok if you factor in credit risk and liquidity"price + lf + cf + of > 100lf = liquidity factorcf = credit factorof = option to convert to New DeutschemarkCan I try to ask again. Negative rate implies that at some moment the price of the bond higher than notional 100 at maturity. If bond perfect I can assume that price 100 remains 100 from beginning to the end of the bond'd lifetime. Factor of liquidity, credit risk and ect should decrease the current price of the bond?

QuoteOriginally posted by: list1QuoteOriginally posted by: daveangelQuoteOriginally posted by: list1outrun, can you be more specific or quantify your statement "The negative yields are perfectly ok if you factor in credit risk and liquidity"price + lf + cf + of > 100lf = liquidity factorcf = credit factorof = option to convert to New DeutschemarkCan I try to ask again. Negative rate implies that at some moment the price of the bond higher than notional 100 at maturity. If bond perfect I can assume that price 100 remains 100 from beginning to the end of the bond'd lifetime. Factor of liquidity, credit risk and ect should decrease the current price of the bond?if you had a Eur 1bn in cash, it would probably cost you a bit of cash to put on deposit in a creditworthy bank. of course you can put it in a less creditworthy bank and take the punt that your deposit doesn't get bailed in. if you wanted a pick up in yield you probably have to tie up your deposit with a substantial break fee. alternatively, you can buy a short term instrument issued by Germany - you could probably sell it at any time and you have the credit of the federal republic which is AAA. also, if things go tits up and the germans decide to leave the euro then they will issue a new DM and your shot term instrument would convert into that and given that the DM would likely rise against the euro then you have a benefit from that.

"if you had a Eur 1bn in cash, it would probably cost you a bit of cash to put on deposit in a creditworthy bank" how we can interpret a bit of cost. Is this payment for safe storing similar to goods?

QuoteOriginally posted by: list1"if you had a Eur 1bn in cash, it would probably cost you a bit of cash to put on deposit in a creditworthy bank" how we can interpret a bit of cost. Is this payment for safe storing similar to goods?it doesn't matter

risk free rate we can broadly interpret as price for financing. What is an appropriate interpretation of the negative rate?

QuoteOriginally posted by: list1risk free rate we can broadly interpret as price for financing. What is an appropriate interpretation of the negative rate?That some investors have nothing they wish to finance and are willing to pay to store their money in a safe place.

QuoteOriginally posted by: Traden4AlphaQuoteOriginally posted by: list1risk free rate we can broadly interpret as price for financing. What is an appropriate interpretation of the negative rate?That some investors have nothing they wish to finance and are willing to pay to store their money in a safe place.I have had the same feeling and it can confuse. I can understand if it was fruits but money it is quite strange. Does it mean that Swiss banks have too much money and and investors do not see reasons for investments or for trading.

QuoteOriginally posted by: list1I can understand if it was fruitsYou would pay to store fruit in a bank?How long would you put them on deposit for?I can picture you walking into the bank:list1: "I'd like to withdraw some fruit please"cashier: "Your bananas?"

QuoteOriginally posted by: MHillQuoteOriginally posted by: list1I can understand if it was fruitsYou would pay to store fruit in a bank?How long would you put them on deposit for?I can picture you walking into the bank:list1: "I'd like to withdraw some fruit please"cashier: "Your bananas?"I meant somewhat different interpretation by using fruits as similar as money. For along time by holding = borrowing money for a time borrower paid lender for the privilege. For a few years situation changes and borrower makes the privilege to lender. When we use store to keep say apples in a particular conditions We pay the store owner for providing appropriate temperature otherwise apples will not be sold. Money could not be spoiled in time so for what reasons we are paid. We ignore the fact that it can be stealed. I do not think about a withdrawing possibility. We put $100 + $1(interest) to receive $100 in a year. What do kind of expenses $1 interest is covered?

QuoteOriginally posted by: list1QuoteOriginally posted by: MHillQuoteOriginally posted by: list1I can understand if it was fruitsYou would pay to store fruit in a bank?How long would you put them on deposit for?I can picture you walking into the bank:list1: "I'd like to withdraw some fruit please"cashier: "Your bananas?"I meant somewhat different interpretation by using fruits as similar as money. For along time by holding = borrowing money for a time borrower paid lender for the privilege. For a few years situation changes and borrower makes the privilege to lender. When we use store to keep say apples in a particular conditions We pay the store owner for providing appropriate temperature otherwise apples will not be sold. Money could not be spoiled in time so for what reasons we are paid. We ignore the fact that it can be stealed. I do not think about a withdrawing possibility. We put $100 + $1(interest) to receive $100 in a year. What do kind of expenses $1 interest is covered?I think you are getting at this from a slightly wrong angle. These are just market prices, not payment for any particular services. The price of a Swiss government bond that pays off CHF 100 a year from now is nearly CHF 101 today. I would not buy that for my personal account, but if you are a Swiss bank or an asset manager with a benchmark that is dominated by Swiss government bonds, you may not have much of a choice. The storage cost argument comes up when you consider "beating the market" by holding physical cash instead of bonds, but most estimates I have seen comes in well below 1% per year (more like 20-30 bps). Physical cash is just not considered an investable asset for most investment managers, although over time that will most likely change if rates stay negative.

QuoteOriginally posted by: bearish...... Physical cash is just not considered an investable asset for most investment managers, although over time that will most likely change if rates stay negative.Physical cash is considered an investable asset by fundamental value investors, as it provides the ability to move quickly on potential deals, eg; Warren Buffett.

QuoteOriginally posted by: dweebQuoteOriginally posted by: bearish...... Physical cash is just not considered an investable asset for most investment managers, although over time that will most likely change if rates stay negative.Physical cash is considered an investable asset by fundamental value investors, as it provides the ability to move quickly on potential deals, eg; Warren Buffett.surely that idea must have been debunked by now. you can always sell one asset to buy another.