2.55% Locked In Interest Rate on 10 Year Government Bonds

Lnado on 21/01/2015 - 09:28

Moved to Forum: Original Link

Who'd say no to the deal of a lifetime? Tony Abbott would, and it's our tragedy.

The 10-year bond rate is the rate at which the government can borrow for 10 years at a fixed rate of interest. Right now it's just 2.55 per cent, an all-time low.

If Australia was to borrow, big time, for important projects that took the best part of a decade to complete, it would have no risk of ever having to fork out more than 2.55 per cent a year in interest. The record low rate would be locked in for 10 years.

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Comments

  • DealzEddy123 on 21/01/2015 - 09:29

    wtf gtfo

  • bgazer on 21/01/2015 - 09:45

    So in 10 years when the bonds need to be rolled over what will the government do then if it is drowning in debt? And if its tax revenues do not increase what services will it need to cut in the mean time to service the debt if the debt is not increased further. Greece also took the golden opportunity to borrow money cheaply when it joined the Euro and look where it is today. Japan borrowed heaps to spend on infrastructure and now finds itself on the verge of bankruptcy.

    • ESEMCE on 21/01/2015 - 10:14
      +1

      Probably sell off assets…
      You know, like the ones we're not building at the moment…
      The problem is that the Howard/Costello Libs did such a good job of selling the concept that government debt is bad, that they've knobbled all successive government's attempts to take advantage of cheap debt.

      • djones145 on 21/01/2015 - 12:00

        indeed
        in periods where growth is slow (due to fall in mining, demand from china slowing (but still growing at 7%), you do need to simulate the economy and deficits aint that bad (better than reduce spending, from governments to households, then we fall into recession!)

        sure we don't want to go crazy like Greece, but focusing too much on surpluses is not good when growth slowing and our main trades like iron and coal are slow and reducing in price!

    • thord on 21/01/2015 - 11:59

      Or there could just be some refinancing of current debt?

  • djones145 on 21/01/2015 - 12:01

    post it as a deal and send the link to joe and tony!

  • cloudy on 21/01/2015 - 12:16
    +4

    The question really is, should we borrow just because it is cheap to?

    Generally speaking, cheap debts can make some non-financially viable projects viable, but it's unlikely a few basis points of cheaper debt makes any unviable project a good one.

    • ESEMCE on 21/01/2015 - 13:24

      Of course it should be spent responsibly..

    • ilikeradiohead on 21/01/2015 - 15:20

      Back at uni we were told to judge projects' returns on their returns exclusive of financing. If it's a dud project it doesn't matter how attractive the financing is. (not that a government would ever propose something that's poor value for money, why just look at Perth's world famous Belltower!)

      That said if they can roll over some higher interest debt to lower interest debt there isn't really any reason not to.

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