It would seem that, in a matter of months, the world has become a pretty scary place. Nowhere is that better reflected than in the historic drop in interest rates around the world.
In the U.K., which votes next week on whether or not to break away from the European Union, 10-year Gilt rates (British bonds are called “Gilts” because they used to be printed on gold-edged paper), are yielding a record low 1.13 percent
Remember Alan “there was a flaw in my ideology” Greenspan?
Here’s what he has to say on negative interest rates…
https://www.youtube.com/watch?v=9aoRrr7Lo9M
wsj.com/articles/fed-decision-makers-wrestle-with-so-called-natural-rate-1465751241
U.S. Federal Reserve Chairwoman Janet Yellen and other Fed officials are struggling with the long-term view of monetary policy. Photo: REUTERS
While Federal Reserve officials debate when to next raise short-term interest rates, they also are wrestling with the question of how high to lift them in coming years.
Signs point toward the new normal being much lower than in the past, which has broad implications for when the Fed should tighten monetary policy, how quickly, and how far.
Central banks are having a difficult time in their efforts to stimulate slumping economies—even as interest rates plunge to fresh lows. 77
Central banks are essentially out of ammunition, with zero and negative interest rate policies spurring greater savings, not growth, said Michael Heise, chief economist at Allianz Group.
Moves by central banks from Japan to the euro zone to slash interest rates below zero have upended financial markets: investors are now paying some governments for the privilege of parking their funds while commercial lenders are mulling storing their cash in costly vaults instead of keeping them with central banks.
Despite the stimulus, economic growth remains feeble.
That’s a lot of bonds with less than no return
Almost $10tn of negative yielding government bonds are costing investors about $24bn annually, according to calculations by Fitch, posing challenges to long-term investors that rely on sovereign debt as a bedrock of their portfolios.
[Pension deficits are] a ticking time bomb. Unfortunately, it is one that will explode slowly so it never creates the feeling of a crisis
https://next.ft.com/content/8d9627e2-1223-11e6-839f-2922947098f0
When political campaigns go negative things gets very ugly. Why would we think it turns out differently when it comes to interest rates ? But, for central banking, there’s nowhere left to go…
from Business Day
GLOBAL equity markets suffered a tumultuous start to 2016, with a confluence of factors seeing market participants hit the “risk-off” button. Among these factors was the continued decline in both growth and inflation expectations. As central banks have exhausted more traditional monetary policy tools, they have had to look to more unconventional methods to achieve their mandated goals. One such method is negative interest rate policies which the central banks of Sweden, Denmark and Switzerland have all adopted for some time now.
Show us some backbone, please or could the Fed raising rates create a slow motion Lehman-like chain-reaction?
from Seeking Alpha: the Spineless Fed by Parke Shall
Summary
- Market is anxiously awaiting Fed minutes today.
- Fed needs to remain hawkish and confirm second rate hike if they want to keep what little credibility they have left.
- With inflation now heading toward Fed target, there are many options Fed has before needing to go NIRP.
Today is certainly going to be a big day for the markets. Today we will get the latest round of thinking from the Federal Reserve as to whether or not they want to continue with rate hikes this year. TheToday is certainly going to be a big day for the markets. Today we will get the latest round of thinking from the Federal Reserve as to whether or not they want to continue with rate hikes this year. Fed had anticipated four rate hikes this year, but as markets have looked a little bit shaky, the Fed has become even more spineless and is deathly afraid to raise rates unless everything is perfect and markets are ripping the all-time high.
According to Morris Beschloss negative interest rates are a stealth tax.
Negative interest rates, therefore, are the result of an international money glut never before experienced during a period of a flat global economy. This, in effect, is showing little signs of growth, either by its commercial and industrial segment, or even more so by the global consumer sector.