the key difference is the lack of sweat shop wages in Treasury Buildings. Indeed, quite the opposite…

‘perhaps NAMA should be based in Frankfurt??’

Just like Nike design in the US and do the grunt work in China; as regards NAMA, the ECB have done the former in Frankfurt while Treasury Buildings here can get on with the latter - we’ve found our level ..

its very simple.

suppose NTMA auctions 60Bn bonds in return for cash. then NAMA uses this cash to buy bad assets from banks.

would you call this QE? of course you would not. its just borrowing.

NAMA is equivalent to this, and has the same economic effects.

sarcasm aside, why do you think that 55% of an Irish Gilt issue this year was purchased by domestic Irish banks, who then ran to the ECB with them……for ‘real cash’…..the NAMA bonds are merely a logical progression of this…..perhaps NAMA should be based in Frankfurt??

What do you call a repo that with a willing buyer (ECB) who will facilitate rollover (whatever the frequency - short or medium) for the next 15 years?

In return for Cash to a Bank who can use this money to bolster reserves and engage in credit creation by issuing new loans by a factor of 10x/15x

Originally I stated that it was ‘tantamount’ to QE, which it is as the end result is the same, afterall the purpose of NAMA is ultimately to enable the Irish banks to engage in new lending

If the Irish banks do increase PSC, then Irish & EA M3 will increase

The RePo traders that I used to work with had an average security holding period of between 24hrs and 1-week. These NAMA bonds are clearly very different

what if… what if… what if….

The only person not what-if-ing is Eamon Ryan becasue he was at the cabinet meeting!

I had envisaged the Greens wringing significant changes from their FF partners
but I now despair at the way they are being manipulated. RTE are reporting on news now = “Equal share of financial risks” for banks. David Murphy then concedes that a small proportion of loan will be affected.

This is a monumental con.

I hope Karl can inform the membership of the Greens before their convention.

Because there are no free lunches.

What really does matter is that these bonds are recognised at par for the purposes of the regulatory balance sheet. Eoin has confirmed that so long as they “held to maturity” that will be the case. Meanwhile they may be trading at 90. That means the taxpayer has been able to clean up the banks’ balance sheets using paper only worth 90 but acceptable at par for capital purposes. An amazing coup courtesy of the ECB.

Why are the anti NAMA faction against every single facet of this initiative. Why don’t thy concede that these 1.5%ers are a wonderful concession but continue to argue that this is irrelevant to the pro/anti nationalisation debate.

Note that I do not refer to a NAMA debate. Most now accept NAMA in some form. The residual debate is how much taxpayer ownership of the banks is compatable with NAMA.

From RTE site “This means, in the case of a small proportion of the loans, the banks will not get all the money immediately.”

Are the Greens buying an eviscerated NAMA2 and selling it as the Prof. Honohan solution.

normal repurchase agreements (repo, collateralised loan) happen every day of the week, both interbank and with central banks.

QE is when ecb buys assets.

i get bg’s point that as long as the ECB repo is done at a correct ‘market’, or ‘fair’ rate, then it does not constitute QE. However, i just don’t think its gonna be done at such a rate.

As per Brian Woods point above, i also question whether these bonds can really be issued on a 6-monthly rollover basis, hendce why i beliece they’ll be medium0to-long term nature bonds.

When an Irish bank takes the NAMA bond to the ECB, although the ECB does not ‘buy’ it, it is merely swapped for a defined period, it does issue cash - electronically into say that Bank’s account.

That is QE. Where does the money come from otherwise?

Just listened to Eamon Ryan selling NAMA on the basis of “very low cost bonds from the ECB”.
?????????????

“I imagine this is the deal struck with the ECB, that as long as the Irish banks hold them at 100 on their books on a hold-to-maturity basis (which is fully legal and allowable) then they’ll repo them off par and not their market value. As soon as the irish banks try to sell them openly, well all bets are off.”

It is daft to suggest that the ecb will accept phoney bond valuations and ignore time value of money. they don’t do cute hoor finance. my guess is that the ecb themselves insisted that the bonds be tradable.

In any case as BL points out, 1.5% is a reasonable market yield on a short dated bonds or tbills. Repos at par, no QE.

NAMA as a mechanism for a helicopter drop of cash into the irish economy by ecb? Sorry, this is about as plausible and sad as the moving statues of 1980s.

We will soon know. My bet is that these will be medium bonds aligned to the estimated NAMA cash receipts. The floating rate is what justifies the 1.5% though where is the default spread?

I cannot conceive of 60Bn 6 month paper rolloing over. The only candidates to do the roll-over are the banks whose bonds are being redeemed and if this rollover is voluntary, there is no it can be assured, and if it is in some was compulsory well then they are medium term bonds by any other name.

We shall see on N-day.

Whilst we are in speculative mood, my best estimate for the average haircut is 30% plus giving the banks a piece of the NAMA action. This is a purely political speculation, higher than the stockbroking community is touting, but not so high as to tip the government towards de fact nationalisation of AIB.

So you saw it here first folks - Medium Term Bonds & 30% haircut.

thats exactly my assertion. Given that the bonds will be paying 90-100bps less than comparable general Irish government bonds, they should trade at a huge discount to par. However, given that none of these bonds will be sold on by the Irish banks at any stage in the first few years of the NAMA project, they will still hold a value of 100 in the ECB’s eyes, as im sure has been agreed. As such they will be repoing them at 96 (@ yoganmahew - i think its only 4% for the 7-10yr category?), when clearly they should be repo-ing them much lower than this (by my reckoning at around 93 on price, 89 on repo assuming 100bps higher real yield).

I imagine this is the deal struck with the ECB, that as long as the Irish banks hold them at 100 on their books on a hold-to-maturity basis (which is fully legal and allowable) then they’ll repo them off par and not their market value. As soon as the irish banks try to sell them openly, well all bets are off.

You could be right and this may not happen, but quite clearly most other people, including Alan Ahearne, seem to think it will.

I was just pointing out that some people might just see
NAMA = immoral
in your article and not see what you are really saying is
NAMA-as-is(assumption of rigged overvaluation)=immoral.

I am all for morality and I am all for paying a price for morality; that this what human dignity is all about. However, it is hard to have dignity and to have the opportunity to exercise and promote morality when you have no job, no home and no future or when you are too old to work and have no money for the fuel. That is why I think that if we are concerned about those on the margins then our first concern must be an effective solution. I think gross overpayment is both ineffective and immoral.

The posited term for the NAMA bonds is ten years.

The haircut for ten year fixed or floating bonds is 5.5%, so with the government issuing at 100, the ECB will give back 94.5.

What would a 1.5% government bond attract in interbank repo? That’s about a five-year bund coupon, isn’t it?

Subtract the two, work it out as a percentage - there you go…