If you live in the United States, chances are you won’t be seeing negative interest rates at your local bank, at least for the foreseeable future. However, citizens in Europe and Japan face a real possibility of facing negative rates at their bank branches, as central banks in nine large countries have now set key rates below zero. Meanwhile, negative bond yields have become normal around the world. According to Bloomberg data, last week over $7 trillion of the world’s bonds had negative yields; this amounts to over 25% of global developed country bond debt! The U.S. bond markets are not immune; some treasury securities (Tbills) have offered negative yields in the past year. While economists continue to debate the efficacy and impact of negative rates, the move below “the lower bound” of zero is a new phenomenon.
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