Will U.S. Investors Need to Navigate Negative Interest Rates?

By admin
In August 27, 2019

A recent article from Bloomberg highlights the challenges that negative interest rates are having on German savers and bankers alike (see Bloomberg).  While historically unprecedented, the negative rate phenomenon has become a global commonality, with $15 trillion of global debt carry negative yields.  In Switzerland, government bonds across the entire maturity spectrum and there are 18 countries currently with negative bond yields. 

Savers apparently still view government bonds as “risk-free” assets, despite the fact the bonds are guaranteed to lose money (see Bizarro World of Negative Interest Rates).  While this gets sorted out, it appears that investors are beginning to turn to cash or precious metals (Negative Rates are Coming for Your Savings). U.S. savers are not yet subject to the negative rate dilemma, but given the recent Fed lowering of the discount rate, Chairman Powell and futures markets predicting further Fed rate cuts, the trend is certainly appearing like more of a possibility for U.S investors.  For more, see How Negative Interest Rates Work.