Do Central Banks’ Negative Rates Work in Europe?

Do Central Banks’ Negative Rates Work in Europe? Not really. Actually, negative rates distort economies and leave little room to maneuver in the next recession. Secondly, extremely low interest rates are also bad for European banks, like Deutsche Bank, which in turn is bad for economic growth. It’s a feedback loop which could lead to…

Total Negative Yielding Corporate Bonds Outstanding

Total Negative Yielding Corporate Bonds Outstanding Negative-yielding corporate debt passed $1 trillion in market value. Investors face significant risk should rates start to rise. Picture source: Bianco Research

$11 Trillion Bonds Globally Trade At Negative Interest Rates

$11 Trillion Bonds Globally Trade At Negative Interest Rates The total amount of negative interest rates climbed to USD 11 trillion. Investors are paying governments for the privilege of holding their bonds and are losing so much money in real terms. Picture source: Deutsche Bank Global Research

Negative Yielding Bonds In the World

Negative Yielding Bonds In the World Now, 25% of all bonds in the world trade at negative interest rates. Keep in mind that raising interest rates in the future could be painful for bond investors. Picture source: Deutsche Bank Global Research

The Amount of Outstanding Negative-Yielding Debt since 2009

The Amount of Outstanding Negative-Yielding Debt since 2009 Investors are paying governments for the privilege of holding their bonds and are losing so much money in real terms. Raising interest rates in the future could be painful for bond investors. Picture source: Jeroen Blokland, Bloomberg

Commercial and Industrial Loans Continue to Accelerate in the U.S.

Commercial and Industrial Loans Continue to Accelerate in the U.S. That’s a positive sign for the U.S. economy. Indeed, U.S. banks wouldn’t be lending if they were concerned about the economic situation. Past three recessions saw bank loans negative year over year.

Small Bank Lending and 2-Year/Fed Funds Spread

Small Bank Lending and 2-Year/Fed Funds Spread This chart shows the correlation between small bank lending and falling rates, and the negative effect of an inverted yield curve on small bank lending. Picture source: TS Lombard

Term Premium on a 10-Year Zero Coupon Bond

Term Premium on a 10-Year Zero Coupon Bond Term premium on a 10-year zero coupon bond remains in negative territory. Investors do not seem to fear rising rates over the long-term. Term premium is the risk premium (or the bonus) that investors receive for the risk of owning longer-term bonds.

U.S. Bond Market Hedged and Unhedged

U.S. Bond Market Hedged and Unhedged Investors are frantically searching for yield, knowing that 25% of all bonds in the world trade at negative interest rates. Our world is aging with high levels of debt and low interest rates (maybe for a long time). Picture source: Fidelity Investments