Could U.S. join the negative yield club?

[Bullitt]

Contracts for fed funds futures — which anticipate the overnight interest rate set by the Federal Reserve — were quoted at prices that implied rates of between minus 0.015 per cent and minus 0.03 per cent for late 2020 and early 2021.

John Briggs, head of strategy for the Americas at NatWest Markets, said he saw a very slim chance the central bank would pursue such a policy — but cautioned against writing it off altogether.

https://www.ft.com/content/934dc7d5-96fe-4ea7-8e90-90ca63d226b8

 

[TommyIV]

President Trump continues to pressure the Fed to push barrowing rates to zero or lower. The current Fed memebers don't seem to share the enthusiasm nor do they express giving in to political pressures. But if interest rates did drop to Trump's desired levels investors close to or in retirement may pay the cost, or will have to reimagine the typical portfolio for someone later in their life. The effect zero level interest rates typically have on cash holdings and bond prices may push near retired investors looking for a return to enter riskier equities.

Trump wants even lower interest rates: What that would mean for your retirement savings

 

[TommyIV]

Favorite quote of the day comes from Market Watch:

Carl Weinberg, chief economist at High Frequency Economics, noted that when a 10-year government note has negative interest rates, it is worth less than “a bag of dirt stored in your basement.”

I took that as a buy signal for dirt. Just bought 10 bags at home depot... probably going to be a long-term hold.

 

[evilanne]

I think negative rates are crazy & certainly hope we don't ever go there.

 

[TommyIV]

Analysts, including former Federal Reserve Chairman Alan Greenspan, say it is possible for yields to fall below zero like seen in parts of Europe and Japan. Negative yields would most likely needed to be preceded by a recession in the U.S. economy current uncertainty in trade and the global economy lets that idea be a possibility in the longer term.


Greenspan says ‘there is no barrier’ to negative yields in the US