Posted on 03/21/2020 10:38:28 AM PDT by ConservativeMind
What are negative interest rates?
A negative interest rate is exactly how it sounds — it’s when an interest rate (or a yield) falls below 0 percent.
It seems counterintuitive. After all, how can a rate actually fall below zero, a number that’s literally meant to be a floor for traditional borrowing and lending activities?
Take Germany, for example. Its government bond yields are trading in the negative territory all the way out to 20 years. Bond yields are negative in France, Denmark and the Netherlands right now, and they were once sub-zero in Belgium.
The Riksbank of Sweden, the oldest central bank in the world, was among the first to implement what’s now known as a negative policy rate, when it announced in 2009 that it would charge banks to hold deposits. Technically, however, the central bank of Denmark in 2012 became the first to bring its key policy rate below zero.
Today, the European Central Bank’s (ECB) interest rate for deposits is minus 50 basis points, while the Bank of Japan’s (BOJ) short-term interest rate target is minus 10 basis points.
“Negative rates have been one of the unconventional policy tools [used] since the global financial crisis,” says David Lebovitz, executive director and global market strategist at J.P. Morgan Asset Management. “If you look at any traditional income textbook, there is no mention of negative interest rates. This has been an experiment over the course of the past decade, with the main players being people like the ECB and the central bank of Sweden.”
How negative rates work
If a yield on a savings account is negative, you’ll (theoretically) have to pay a bank to hold your cash. Think of it like a storage fee.
(Excerpt) Read more at bankrate.com ...
Lending at interest is forbidden under Sharia law. Just another step closer.
oh, and wear you face covering (Chinese virus mask)
If inflation is 2%, it still pays to have a bond at -1.75%.
Not sure how you get that
Negative rates are bonds with low positive rates sold at a premium to their value. There are lots of bonds available like treasuries for example that sell with positive rates and at fair prices. If European law allowed their banks to buy any bonds they would not be buying those with negative rates. Those banks are not worth anything at all.
Credit cards always have a higher interest.
I have no idea why PMs are doing what they’re doing these days. I’m just holding on tight!
If I did know, I’d be RICH, RICH, RICH and wouldn’t be hanging out with the po’ folk here, LOL! :)
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