Have to take stuff with salt Mosquito. Whether it’s from the Cons or Liberals
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Debt servicing cost currently going down, likely because they are rolling long term debt as it matures, into short term debt. So fairly significant rate savings as aged debt matures. In time, depending on factors and variables we can only guess at, they will likely start locking in longer term debt. Basically, at its simplest, no different than consumer mortgages. During low rate environments, short term. During rising environment environments lock in more long term. Who knows what the world might look like in 5-10 years or 25. But right now, stuff is maturing that was issued, months ago, 1 years ago, 5-10 years ago. At much higher rates relative to today.
T-Bills are discount notes. Bonds pay interest. Discount notes, you buy at a discount to par. And when it matures the holder gets the face value.
Thus a $100 T-Bill might be issued at $96 ( depending on rates, credit rating, time value). Then 1 or 3 years later its worth $100. So they get $96 when it’s issued, owe $100 when it matures.
One other thing to consider with devalued money (printing $$). Just as the rich and well off can buy RE as a hedge against inflation. So can they.
$1 today is worth 0.50 “tomorrow”
So that means, the debt obligations are devalued too.
$1 in interest paid 5 years from now, is paid with .50 cents per se. From a quarter to a penny.
But that’s also where interest rates ( takes more $ to pay off $1) and yield curves ( future value) come in.
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Originally Posted by JBen
