[misterno]

Saudi Arabia has over $680BN in their reserve all invested in US Treasuries.

Now they are selling bonds which means they have to pay interest on debt. Since the interest rate on this debt can not be lower or equal to US treasury rate, then that means they will be paying more interest on debt than the interest they receive from their reserve.

Why would they want to do that? This does not make sense.

[Cog]

Because the last guy standing wins. Saudi intends to be that guy.

[zoidberg]

Because liquidating a reserve can cost more than a cheap low interest bond. Opportunity cost.

[misterno]

$this->bbcode_second_pass_quote('zoidberg', 'B')ecause liquidating a reserve can cost more than a cheap low interest bond. Opportunity cost.

[GoghGoner]

http://www.wsj.com/articles/saudi-arabia-issues-bonds-worth-5-billion-to-plug-budget-shortfall-1439305126

$this->bbcode_second_pass_quote('', 'A')nalysts at London-based Capital Economics said the bond issuances are a sign of Saudi Arabia’s willingness to widen its domestic capital market. In June, Saudi Arabia for the first time opened its stock market to direct foreign investments.

“A deeper government bond market would provide investors with a greater choice of assets to hold in their portfolios,” said Capital’s William Jackson. “And it would allow the development of a yield curve, allowing for the more efficient pricing of private-sector debt,” he added.

[Outcast_Searcher]

$this->bbcode_second_pass_quote('misterno', ':')shock: Saudi Arabia has over $680BN in their reserve all invested in US Treasuries.

Now they are selling bonds which means they have to pay interest on debt. Since the interest rate on this debt can not be lower or equal to US treasury rate, then that means they will be paying more interest on debt than the interest they receive from their reserve.

Why would they want to do that? This does not make sense.

[dinopello]

Apple Corp has over 170 Billion in cash reserves yet just took our a loan for 7 billion to buy back shares. It had to do with taxes and probably other stuff. If I had billions I'd probably do something similar.

[zoidberg]

$this->bbcode_second_pass_quote('misterno', '')$this->bbcode_second_pass_quote('zoidberg', 'B')ecause liquidating a reserve can cost more than a cheap low interest bond. Opportunity cost.

[misterno]

$this->bbcode_second_pass_quote('Outcast_Searcher', '')$this->bbcode_second_pass_quote('misterno', ':')shock: Saudi Arabia has over $680BN in their reserve all invested in US Treasuries.

Now they are selling bonds which means they have to pay interest on debt. Since the interest rate on this debt can not be lower or equal to US treasury rate, then that means they will be paying more interest on debt than the interest they receive from their reserve.

Why would they want to do that? This does not make sense.

[misterno]

$this->bbcode_second_pass_quote('dinopello', 'A')pple Corp has over 170 Billion in cash reserves yet just took our a loan for 7 billion to buy back shares. It had to do with taxes and probably other stuff. If I had billions I'd probably do something similar.

[misterno]

$this->bbcode_second_pass_quote('zoidberg', '')$this->bbcode_second_pass_quote('misterno', '')$this->bbcode_second_pass_quote('zoidberg', 'B')ecause liquidating a reserve can cost more than a cheap low interest bond. Opportunity cost.

[americandream]

$this->bbcode_second_pass_quote('misterno', ':')shock: Saudi Arabia has over $680BN in their reserve all invested in US Treasuries.

Now they are selling bonds which means they have to pay interest on debt. Since the interest rate on this debt can not be lower or equal to US treasury rate, then that means they will be paying more interest on debt than the interest they receive from their reserve.

Why would they want to do that? This does not make sense.

[kublikhan]

$this->bbcode_second_pass_quote('misterno', 'A')ll SA's reserves are invested in US treasuries

[americandream]

SAs assets will be subject to the same prudential rules as any other asset pool. What is different here is their use of usury....clearly they realise that not forwardising this value is just plain old stupid.

[misterno]

$this->bbcode_second_pass_quote('americandream', 'S')As assets will be subject to the same prudential rules as any other asset pool. What is different here is their use of usury....clearly they realise that not forwardising this value is just plain old stupid.

[Cog]

$this->bbcode_second_pass_quote('misterno', '')$this->bbcode_second_pass_quote('americandream', 'S')As assets will be subject to the same prudential rules as any other asset pool. What is different here is their use of usury....clearly they realise that not forwardising this value is just plain old stupid.

[americandream]

Securitisation is a form of forwardising. In essence, value that is latent in an asset on a forwards basis, for example the resale value of a house or in this instance, oil in the ground, is parcelled into intangible assets brought forwards such as tradeable shares or debt instruments and exchanged for value. Or to make it easier, money that can only be spent tomorrow is brought backwards in time (or the owner is taken forwards in time) to be used immediately.

It is an accounting term and was the basis of much of the securitisation work I did as a tax lawyer.

[Outcast_Searcher]

$this->bbcode_second_pass_quote('misterno', '
')$this->bbcode_second_pass_quote('Outcast_Searcher', '2')). I'm not finding numbers anywhere CLOSE to the $680 billion number you give on ustreasury.gov, where it is documented. For a whole group of oil exporters (15 countries), I'm seeing well under half of that as of May, 2015 (the last month they give).

http://www.treasury.gov/ticdata/Publish/mfhhis01.txt

[americandream]

The takeaway from this is not that SA are being prudent...they will use one of the big 4s and it is a given that their mix will be duly diligent. What is remarkable is the issue of usury instruments.

[americandream]

Incidentally, good find misterno. This is pretty epic stuff. I could do with you as my news provider.