i liked the little drop about "when Come by Chance closes". It'd be nice if the government were to preemptively protect workers' pensions before the Brayascam implodes.
Sorry, but you can't multiply interest rates by exchange rates. The 3.067% interest in Euros does not convert to 4.6% in Cdn$. To see this just consider that the interest payment in dollars will be 1.5x more than in Euros but also the principal (the denominator) will be 1.5x more as well - so they cancel out.
But hedging costs are real. They don't explain in the news release but I imagine GNL has entered into swaps on repayment of interest and principal. Under covered interest parity, that makes interest costs about the same no matter which currency you borrow in or how low the stated % coupon.
And so they aren't bragging about big savings in saying "the placement resulted in a cost savings of approximately $450,000 or five basis points versus what may have been achieved in the domestic market". So spread over ten years, that's about $45,000 per annum so they can cover maybe half a year's salary for a NAPE member in the debt management division.
There are undoubtedly complex arrangements to produce an artificial appearance that this is at a lower cost than it actually is. This is the point.
And as I noted, if they are right and the London exchange is so much better, they need to explain why two days before they placed a larger amount at a higher rate/yield/cost.
And... we have been down this road before. As the foreign currency debt volume grows, we outstrip our ability to hedge the impacts of currency fluctuations.
i liked the little drop about "when Come by Chance closes". It'd be nice if the government were to preemptively protect workers' pensions before the Brayascam implodes.
Sorry, but you can't multiply interest rates by exchange rates. The 3.067% interest in Euros does not convert to 4.6% in Cdn$. To see this just consider that the interest payment in dollars will be 1.5x more than in Euros but also the principal (the denominator) will be 1.5x more as well - so they cancel out.
But hedging costs are real. They don't explain in the news release but I imagine GNL has entered into swaps on repayment of interest and principal. Under covered interest parity, that makes interest costs about the same no matter which currency you borrow in or how low the stated % coupon.
And so they aren't bragging about big savings in saying "the placement resulted in a cost savings of approximately $450,000 or five basis points versus what may have been achieved in the domestic market". So spread over ten years, that's about $45,000 per annum so they can cover maybe half a year's salary for a NAPE member in the debt management division.
There are undoubtedly complex arrangements to produce an artificial appearance that this is at a lower cost than it actually is. This is the point.
And as I noted, if they are right and the London exchange is so much better, they need to explain why two days before they placed a larger amount at a higher rate/yield/cost.
And... we have been down this road before. As the foreign currency debt volume grows, we outstrip our ability to hedge the impacts of currency fluctuations.