Finance and economics

Buttonwood

Where there's money, there's risk

Events in America show that no asset is copper-bottomed

A GOVERNMENT with debt denominated in its own currency need never default, or so the theory goes.

It can simply print more money to pay off the debt.

In practice, however, countries do default on local-currency debt: six have done so in the past 15 years, including Jamaica, Russia and Ecuador.

Before this week's budget deal, markets had feared that America could join the list, if only in a technical sense.

From the point of view of a creditor, however, the ability of a government to print money is of little comfort if the result is higher inflation or currency depreciation.

Investors who bought Treasury bonds in 1946, when yields were around current levels, did not suffer a formal default.

But over the following 35 years they lost money in real terms at a rate of 2% a year.

The cumulative real loss was 91%.

By that standard, Greek creditors, who recently suffered a 50% loss via default, were lucky.

Given this baleful history, the idea that sovereign debt is risk-free is puzzling.

When it comes to the purchasing power of an investor's money, what does it matter if the loss comes in the form of a formal default or erosion in real terms?

The answer to that conundrum may be that default happens suddenly, whereas inflation and depreciation are slower, giving investors more time to adjust by demanding higher interest rates to compensate for their losses.

This is particularly true in the case of short-term debt, such as Treasury bills; inflation is unlikely to do serious damage to a portfolio in the course of a few months.

Twenty years ago there was much talk of bond vigilantes who would respond to irresponsible fiscal policies by forcing up the interest rates on government debt.

With the bond vigilantes on the prowl, any short-term real loss suffered by investors would be recouped in the form of higher real rates as the government's debt was refinanced.

But by buying bonds in the name of quantitative easing, central banks are influencing interest rates of all maturities these days.

By holding down bond yields, the authorities are employing a policy some have dubbed financial repression, in which real returns on government debt are reduced.

The idea is to make investors buy riskier assets, such as equities and corporate bonds.

In effect, the bond vigilantes have been neutered.

One way of protecting the real value of investors' bond holdings is to buy inflation-linked debt.

The repayment value and interest payments on such bonds are normally tied to a well-known inflation index.

But even these bonds may not be completely risk-free; it is possible to imagine that future governments may find ways to redefine the inflation measure for their own benefit.

And foreign buyers of inflation-linked bonds are still at risk from currency depreciation.

Inflation-linked bonds are extremely attractive to pension funds, since they are a neat match for the funds' liabilities.

So such bonds are snapped up quickly and tend to trade on low real yields; sometimes, those yields are even negative.

An asset is hardly risk-free if it guarantees a real loss.

The concept of a risk-free asset is quite useful in finance.

For a start, it provides the base from which other assets can be priced.

Corporate borrowers pay an interest premium over the risk-free rate; equities have offered a higher long-term return than government bonds to reflect their higher risk.

But what is the true risk-free rate?

Multinational companies can borrow at a lower rate of interest than some governments: compare Apple with Greece, for example.

And although America is the world's biggest economy, its government does not borrow at the cheapest rate on the planet:

Japanese yields have been lower for many years and German long-term yields are now significantly below those of Treasuries.

Where America does have a substantial advantage is that it borrows in the world's reserve currency—the dollar—and that its debt market is by far the most liquid.

The result is that Treasury bills, in particular, play a vital role in the system as cash equivalents and as collateral for short-term loans and derivative contracts.

Treasury bills are seen as risk-free in this context in that they are instantly and universally acceptable to all participants in the system.

They are the oil that lubricates the global machinery of finance.

That was the real risk of the latest stand-off: not that America would not pay its bills, which it could easily afford to, but that the system would grind to a halt.

财经商业

金融市场

哪里有货币，哪里就有风险

在美国发生的事情显示出没有资产是毫无风险的。

一个拥有以本币为计量单位的债务的政府需要的是永不违约，大概这个理论是可以实现的。

它能简单地印刷更多的货币来支付它的债务。

但是实际上，国家不履行本国货币债务：在过去十五年已经有六个国家这样做了，包括牙买加，俄罗斯和厄瓜多尔。

在本周的预算计划前，市场已经担心美国会加入这个名单，但愿在技术层面上。

然而，从一个债权人的观点来看，一个政府的印钞能力是没有用的，如果结果是对国内投资者更高的通货膨胀率或者对国外投资者的货币贬值。

在1946年国库券年收益率与现在的水平差不多的时候，购买它的投资者没有遭受正式违约。

但是在后续的三十五年他们以每年2%的利率实际上亏钱。

累积的实际损失是91%。

跟据这个标准，最近因为违约损失50%的希腊债权人是幸运的。

考虑到这个可怕的历史，认为政府债务无风险的观点是令人费解的。

那么当提到投资者资金实际购买力时，如果损失以正式违约或者实际侵蚀的形式发生时，这有什么差别呢？

对于这个难题的答案可能是违约突然发生，然而通货膨胀和货币贬值是缓慢的，这给了投资者更多的时间去调整，通过要求更高的利率去赔偿他们的损失。

这个在短期债务中更有现实意义，如国库券；通货膨胀极少有可能在几个月的过程中对投资组合产生严重的损害。

二十年前,有许多关于通过抛售国库券来要求更高年收益和约束美国政策制定者的国际投资者的事迹,他们通过迫使提高政府债务利率来应对不负责任的财政政策。

随着他们伺机而动，投资者遭受的任何短期实际损失会由于政府债务再筹资而以较高的实际利率的形式收回来。

通过以量化宽松的名义购买债券，中央银行这些日子在影响所有的到期利率。

通过压制住债券的年收益率，管理者运用一项政策引入金融抑制，由此政府债务的实际回报减少了。

这个构想是让投资者购买有风险的资产，例如股票和公司债券。

实际上，债券市场秩序维护者们保持了中立。

保护投资者持有的债券实际价值的方法之一是购买通胀挂钩债券。

关于这类债券的回报价值和利息支付一般地说是与一个著名的通货膨胀指数相联系的。

但是即使是这些债券也不是完全无风险的；很有可能可以这样想象未来政府可能为了他们自己的利益找到方法去重新定义通货膨胀措施。

并且通胀挂钩债券的外国购买者仍然面临来自货币贬值的风险。

由于通胀挂钩债券与养老基金的责任非常匹配，它们对养老基金来说非常有吸引力。

所以这些债券很快被抢购一空并且有不正当利用低实际收益率的趋势；有些时候，这些获益率甚至是消极的。

一个资产很难无风险如果它保证实际损失。

无风险资产的概念在金融上是非常有用的。

首先，它提供了其他资产的定价基准。

公司融资者在无风险率上支付利息费用；股票提供一个比政府债券更能反映他们的高风险的长期回报。

但是什么是真正的无风险率呢？

跨国公司可以以比一些政府更低的利率借款：例如，比较苹果公司和希腊。

尽管美国是世界上最大的经济体，它的政府并不以这个星球上最便宜的利率借钱；

日本的年收益率已经愈来愈低很多年了而且德国长期年收益率现在很明显的比国库券低。

美国实质上占优势的地方是它借的是世界储备货币并且它的债券市场是目前流动性最好的。

这样的结果是，尤其是，国库券作为现金等价物和作为短期贷款和衍生品合同作的担保物在这个系统里起了一个至关重要的作用。

国库券因为它们对这个系统里所有参与者迅速和广泛的接受而在这个环境里被看为是无风险的。

他们是润滑全球金融机器的油。

这个才是最新平衡的真正风险：不是美国不付它自己很容易支付的账，而是这个系统会慢慢停滞下来。