Mortgage rates are closely related to yields on long -
term government debt.
For example, Canadian treasury bills, a form of short -
term government debt, have very little risk of loss — the risk of the Canadian government going bankrupt over the investment term is very low.
One major indicator pointing toward continued low interest rates is the Federal Reserve's plan to buy long -
term government debt through the end of June.
Determined weekly based on a weighted average of representative interest rates on short -
term government debt instruments in the money markets of the SDR basket currencies, with a floor of 5 basis points.
A quarter of a century ago, money poured into «world income funds» that bet on seemingly conservative short -
term government debt.
When you factor in inflation, investors of shorter -
term government debt are actually paying the government to hold their money, a proposition that's hard to swallow.
Chris Hurt, a professor of agricultural economics at Purdue University in West Lafayette, Ind., said in a recent presentation that the U.S. Federal Reserve's quantitative easing (that is, the practice of issuing money to buy long -
term government debt) likely elevated U.S. farmland prices.
Not exact matches
Important factors that could cause actual results to differ materially from those reflected in such forward - looking statements and that should be considered in evaluating our outlook include, but are not limited to, the following: 1) our ability to continue to grow our business and execute our growth strategy, including the timing, execution, and profitability of new and maturing programs; 2) our ability to perform our obligations under our new and maturing commercial, business aircraft, and military development programs, and the related recurring production; 3) our ability to accurately estimate and manage performance, cost, and revenue under our contracts, including our ability to achieve certain cost reductions with respect to the B787 program; 4) margin pressures and the potential for additional forward losses on new and maturing programs; 5) our ability to accommodate, and the cost of accommodating, announced increases in the build rates of certain aircraft; 6) the effect on aircraft demand and build rates of changing customer preferences for business aircraft, including the effect of global economic conditions on the business aircraft market and expanding conflicts or political unrest in the Middle East or Asia; 7) customer cancellations or deferrals as a result of global economic uncertainty or otherwise; 8) the effect of economic conditions in the industries and markets in which we operate in the U.S. and globally and any changes therein, including fluctuations in foreign currency exchange rates; 9) the success and timely execution of key milestones such as the receipt of necessary regulatory approvals, including our ability to obtain in a timely fashion any required regulatory or other third party approvals for the consummation of our announced acquisition of Asco, and customer adherence to their announced schedules; 10) our ability to successfully negotiate, or re-negotiate, future pricing under our supply agreements with Boeing and our other customers; 11) our ability to enter into profitable supply arrangements with additional customers; 12) the ability of all parties to satisfy their performance requirements under existing supply contracts with our two major customers, Boeing and Airbus, and other customers, and the risk of nonpayment by such customers; 13) any adverse impact on Boeing's and Airbus» production of aircraft resulting from cancellations, deferrals, or reduced orders by their customers or from labor disputes, domestic or international hostilities, or acts of terrorism; 14) any adverse impact on the demand for air travel or our operations from the outbreak of diseases or epidemic or pandemic outbreaks; 15) our ability to avoid or recover from cyber-based or other security attacks, information technology failures, or other disruptions; 16) returns on pension plan assets and the impact of future discount rate changes on pension obligations; 17) our ability to borrow additional funds or refinance
debt, including our ability to obtain the
debt to finance the purchase price for our announced acquisition of Asco on favorable
terms or at all; 18) competition from commercial aerospace original equipment manufacturers and other aerostructures suppliers; 19) the effect of governmental laws, such as U.S. export control laws and U.S. and foreign anti-bribery laws such as the Foreign Corrupt Practices Act and the United Kingdom Bribery Act, and environmental laws and agency regulations, both in the U.S. and abroad; 20) the effect of changes in tax law, such as the effect of The Tax Cuts and Jobs Act (the «TCJA») that was enacted on December 22, 2017, and changes to the interpretations of or guidance related thereto, and the Company's ability to accurately calculate and estimate the effect of such changes; 21) any reduction in our credit ratings; 22) our dependence on our suppliers, as well as the cost and availability of raw materials and purchased components; 23) our ability to recruit and retain a critical mass of highly - skilled employees and our relationships with the unions representing many of our employees; 24) spending by the U.S. and other
governments on defense; 25) the possibility that our cash flows and our credit facility may not be adequate for our additional capital needs or for payment of interest on, and principal of, our indebtedness; 26) our exposure under our revolving credit facility to higher interest payments should interest rates increase substantially; 27) the effectiveness of any interest rate hedging programs; 28) the effectiveness of our internal control over financial reporting; 29) the outcome or impact of ongoing or future litigation, claims, and regulatory actions; 30) exposure to potential product liability and warranty claims; 31) our ability to effectively assess, manage and integrate acquisitions that we pursue, including our ability to successfully integrate the Asco business and generate synergies and other cost savings; 32) our ability to consummate our announced acquisition of Asco in a timely matter while avoiding any unexpected costs, charges, expenses, adverse changes to business relationships and other business disruptions for ourselves and Asco as a result of the acquisition; 33) our ability to continue selling certain receivables through our supplier financing program; 34) the risks of doing business internationally, including fluctuations in foreign current exchange rates, impositions of tariffs or embargoes, compliance with foreign laws, and domestic and foreign
government policies; and 35) our ability to complete the proposed accelerated stock repurchase plan, among other things.
Even though our activities are likely to result in a lower national
debt over the long
term, I sometimes hear the complaint that the Federal Reserve is enabling bad fiscal policy by keeping interest rates very low and thereby making it cheaper for the federal
government to borrow.
Its European creditors decided on Wednesday to suspend the implementation of short -
term debt relief measures after the Greek
government announced additional spending on pensions - an action that European partners deemed as «unilateral» and disrespecting the efforts agreed under the country's 86 billion euro ($ 89.75 billion) bailout program.
Governments need to retrench fiscally, but this should not be pursued in the short
term while the world economy is in danger of falling into recession when heavy
debt loads are to be paid.
And at a time of political uncertainly and rising U.S.
government debt, where the long -
term viability of pillars of retirement - age financial security like Medicare and Social Security is increasingly in doubt, the urgency of preparing for a long post-career life becomes that much greater.
Standard and Poor's estimates the federal
government's partial paralysis cost $ 24 billion, and consultancy IHS Global Insights said on Wednesday that the spike in short -
term interest yields witnessed in the week of Oct. 14 alone will add $ 114 million to the federal
debt.
In the absence of positive developments that shore up investor sentiment, such as a resumption of growth or rapid progress in achieving fiscal consolidation objectives, neither of which is likely in the current environment, the
government is likely to become increasingly constrained with regard to the
terms under which it is able to refinance maturing
debt.
If unchecked, Moody's believes that the risk of the
government losing access to private
debt markets on affordable
terms and needing to seek direct support from the EFSF / ESM will continue to rise.
The basic problem is that during each recession,
governments increase their
debt load to stimulate the economy and maintain (or even increase) services, but rarely cut back on their
debt loads or services during the prosperous times — creating a long -
term upward trend in indebtedness that Tony Boeckh of The Boeckh Investment Letter calls the «
debt supercycle.»
TORONTO — Fitch Ratings downgraded Ontario's long -
term debt rating Friday, highlighting «risks» on the path to the Liberal
government's target of balancing the budget by 2017 - 18.
Financial repression is a
term describing measures used by
governments to channel funds to themselves as a form of
debt reduction.
A rapid rise in short -
term yields in U.S.
government debt is restoring their appeal.
The amount of
debt that is projected under the extended baseline would reduce national saving and income in the long
term; increase the
government's interest costs, putting more pressure on the rest of the budget; limit lawmakers» ability to respond to unforeseen events; and increase the likelihood of a fiscal crisis, an occurrence in which investors become unwilling to finance a
government's borrowing unless they are compensated with very high interest rates.
Progress in a few areas has been solid: slashing of bureaucratic red tape has led to a surge in new private businesses; full liberalization of interest rates seems likely following the introduction of bank deposit insurance in May; Rmb 2 trillion (US$ 325 billion) of local
government debt is being sensibly restructured into long -
term bonds; tighter environmental regulation and more stringent resource taxes have contributed to a surprising two - year decline in China's consumption of coal.
It is worth noting that, based on PBO long -
term fiscal sustainability for the total
government sector, Minister Flaherty's commitment to eliminate total
government net
debt is no longer achievable.
As you can see, although Alberta was the worst offender in
terms of the discrepancy between how big the
government predicted the deficit was going to be in fiscal 2013 ($ 882 million) and how big it expects it to be now ($ 3.9 billion), it is still the only province without net
debt (that is the accumulated total of annual deficits, which, in turn, result from the
government spending more than it generates in revenues every year).
Drawing from our knowledge of
debt restructuring, bankruptcy, public finance, municipal law and governance, labor law, employee benefits, tax, litigation,
government contracts and more, our attorneys are adept at positioning municipalities for long -
term success.
Ryan Avent pointed out that even if we enacted Trump's massive tax cuts and spending increaes, adding $ 34 trillion in new
debt over the next two decades, our ratio of
debt to GDP two decades from now would still be 30 percentage points less than Japan's
government debt ratio is right now... and the market is still buying their negative interest rate long
term debt...
He also concludes that «raising its (the
government's) deficit target back up to 1 per cent (from zero) makes more sense when there are other short -
term - pain - for - long -
term - gain initiatives that are needed to address more pressing objectives than lowering a
debt ratio that is already the envy of the world.»
This gain in credibility contributed to a rapid decline in long -
term interest rates, which in turn significantly reduced public
debt charges and contributed to stronger economic growth and
government revenues.
«The central banks» plans for printing money to buy bonds from national
governments running huge deficits can not be considered a long -
term solution to
debt problems.»
The paper concludes that with the policy changes to date, including budget cuts and the changes to the Canada Health Act and to the elderly benefit system, the federal
government will have a long -
term sustainable fiscal structure characterized by a declining
debt to GDP ratio.
Professor Scarthe also recommends that, once the deficit is eliminated in 2015 - 16, any future
government should gradually start creating a deficit by, for example, spending on infrastructure and this could be done while at the same time maintaining a stable
debt to GDP ratio of around 25 per cent over the medium to longer
term.
Perhaps the best medium -
term measure of a country's fiscal position is the ratio of
government debt to GDP.
In
terms of
debt reduction,
government projects it will complete the elimination of B.C.'s operating
debt in 2018 - 19, for the first time in over 40 years.
The federal
government is on track to achieve its target
debt - to - GDP ratio of 25 per cent by 2021, evidenced by projected surplus budgets in the very short
term.
More importantly, the
government would still have a low and stable
debt to GDP ratio and be in an excellent position to implement a longer -
term sustainable economic growth strategy.
In his 2012 fall report, the Auditor General raises the issue of «long -
term fiscal sustainability» — the
government's capacity to finance its activities and
debt obligations in the future without imposing an unfair tax burden on future generations.
For example, from: 1) the replenishment of foreign exchange buffers large enough to protect the economy against a protracted shock; 2) a significant reduction in
government debt metrics; 3) a successful diversification of the economy and
government revenues that will become less dependent on oil receipts; 4) continued improvements in governance and institutional strength which act as long —
term constraints on Angola's rating.
Since U.S.
government debt is not long -
term in nature, higher refinancing costs are extremely vulnerable to rising interest rates.
While such a strategy lowers gross borrowing requirements in the medium -
term, it will fuel already high inflationary pressures and increase the
government's
debt stock.
To manage the risk exposure, the Company invests cash, cash equivalents and short -
term investments in a variety of fixed income securities, including short -
term interest - bearing obligations, including
government and investment - grade
debt securities and money market funds.
One major question on Wall Street is if the long -
term downtrend in rates has now reversed, how will the
government pay for all of this new
debt on top of the old
debt?
Premier Silvio Berlusconi's
government in Italy was teetering after it failed to come up with a credible plan to deal with its dangerously high
debts, and Portugal demanded more flexible
terms for its own bailout.
With household and
government balance sheets still weighed down by a large
debt overhang, demand for new loans is extremely weak despite near zero short and long
term interest rates.
The
government's budget had less short -
term impact on financial markets, but there is starting to be a clear pattern whereby the closing of the budget deficit (and the stabilisation of
government debt) which were supposed to be achieved by 2015 are continuously being pushed further into the future.
In simple
terms,
government took real revenue, spent it, and then added more
debt each year.
(These totals count all
government debt coming due - including shorter
term notes - and are therefore larger than estimates of only long -
term debt.)
It will buy $ 600 billion worth of US long -
term bonds in the open market, close to 7 % of all Treasury securities in public hands, or about the amount the
debt that the federal
government will issue over that time period.
In addition to its program to buy mortgage - backed
debt, the Fed has been using proceeds from short -
term government securities to buy longer -
term ones.
This means the
government must be committed to establishing and maintaining a sustainable medium or longer -
term fiscal anchor, one that supports long - run stable economic growth through control of the accumulation of public
debt.
Given historically low long -
term interest rates, the
government has considerable fiscal flexibility to undertake key public investments, while maintaining a falling
debt to GDP ratio.
Achieving the coveted AAA rating is possible for those who issue
debt, whether business or
government, and doing so can make the difference in
terms of financial stability and viability.