Interest Rates: Naturally Negative?
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Interest Rates: Naturally Negative?
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Re: Interest Rates: Naturally Negative?
#2I understand why you would want to set interest rates negative if your central bank is going to buy up all that debt, but as an individual or institutional investor why would you ever want to hold something with negative interest instead of cash?
Why is there even a market for a bond with negative interest rates at all, since compared to a $X bond with negative interest, $X in currency seemingly carries less risk, more liquidity, and a higher rate of return?
Re: Interest Rates: Naturally Negative?
#3I understand why you would want to set interest rates negative if your central bank is going to buy up all that debt, but as an individual or institutional investor why would you ever want to hold something with negative interest instead of cash? Why is there even a market for a bond with negative interest rates at all, since compared to a $X bond with negative interest, $X in currency seemingly carries less risk, mo…
> but as an individual or institutional investor why would you ever want to hold something with negative interest instead of cash?
There are no effective ways besides these bonds to hold tens or hundreds of millions of dollars as cash, even if you hire a warehouse, security, and store pallets of fiat (which has been attempted). You are paying a premium for principal safety.
You either make this choice voluntarily as an asset manager, or because you are required by regulation or other means to hold a percentage of your portfolio in this asset class.
Re: Interest Rates: Naturally Negative?
#4I understand why you would want to set interest rates negative if your central bank is going to buy up all that debt, but as an individual or institutional investor why would you ever want to hold something with negative interest instead of cash? Why is there even a market for a bond with negative interest rates at all, since compared to a $X bond with negative interest, $X in currency seemingly carries less risk, mo…
> but as an individual or institutional investor why would you ever want to hold something with negative interest instead of cash? There are no effective ways besides these bonds to hold tens or hundreds of millions of dollars as cash, even if you hire a warehouse, security, and store pallets of fiat (which has been attempted). You are paying a premium for principal safety. You either make this choice voluntarily as…
Also cash can be made illegal.
Re: Interest Rates: Naturally Negative?
#5Earlier quoted context omitted.
> but as an individual or institutional investor why would you ever want to hold something with negative interest instead of cash? There are no effective ways besides these bonds to hold tens or hundreds of millions of dollars as cash, even if you hire a warehouse, security, and store pallets of fiat (which has been attempted). You are paying a premium for principal safety. You either make this choice voluntarily as…
Also cash can be made illegal.
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Re: Interest Rates: Naturally Negative?
#6I understand why you would want to set interest rates negative if your central bank is going to buy up all that debt, but as an individual or institutional investor why would you ever want to hold something with negative interest instead of cash? Why is there even a market for a bond with negative interest rates at all, since compared to a $X bond with negative interest, $X in currency seemingly carries less risk, mo…
It makes no sense for an individual, since you can keep your money in an FDIC insured account and earn a positive interest rate.
Institutions don't have that luxury - the government doesn't insure large amounts of cash. If they keep it in a bank and the bank goes under, they lose their money. So they keep their money in national governments, which are far safer than banks.
Re: Interest Rates: Naturally Negative?
#7I understand why you would want to set interest rates negative if your central bank is going to buy up all that debt, but as an individual or institutional investor why would you ever want to hold something with negative interest instead of cash? Why is there even a market for a bond with negative interest rates at all, since compared to a $X bond with negative interest, $X in currency seemingly carries less risk, mo…
> but as an individual or institutional investor why would you ever want to hold something with negative interest instead of cash? There are no effective ways besides these bonds to hold tens or hundreds of millions of dollars as cash, even if you hire a warehouse, security, and store pallets of fiat (which has been attempted). You are paying a premium for principal safety. You either make this choice voluntarily as…
I'm clearly no expert but banks seem to be able to do this somehow, no?
Re: Interest Rates: Naturally Negative?
#8I understand why you would want to set interest rates negative if your central bank is going to buy up all that debt, but as an individual or institutional investor why would you ever want to hold something with negative interest instead of cash? Why is there even a market for a bond with negative interest rates at all, since compared to a $X bond with negative interest, $X in currency seemingly carries less risk, mo…
> but as an individual or institutional investor why would you ever want to hold something with negative interest instead of cash? There are no effective ways besides these bonds to hold tens or hundreds of millions of dollars as cash, even if you hire a warehouse, security, and store pallets of fiat (which has been attempted). You are paying a premium for principal safety. You either make this choice voluntarily as…
The latter is the biggest reason. Institutional funds are required to purchase these “low risk” items and many would argue is artificial demand so it ends up doing more harm than good.
Re: Interest Rates: Naturally Negative?
#9I understand why you would want to set interest rates negative if your central bank is going to buy up all that debt, but as an individual or institutional investor why would you ever want to hold something with negative interest instead of cash? Why is there even a market for a bond with negative interest rates at all, since compared to a $X bond with negative interest, $X in currency seemingly carries less risk, mo…
It makes no sense for an individual, since you can keep your money in an FDIC insured account and earn a positive interest rate. Institutions don't have that luxury - the government doesn't insure large amounts of cash. If they keep it in a bank and the bank goes under, they lose their money. So they keep their money in national governments, which are far safer than banks.
It’s positive for now, in Europe the deposit accounts are negative as well for the most part.
Re: Interest Rates: Naturally Negative?
#10I understand why you would want to set interest rates negative if your central bank is going to buy up all that debt, but as an individual or institutional investor why would you ever want to hold something with negative interest instead of cash? Why is there even a market for a bond with negative interest rates at all, since compared to a $X bond with negative interest, $X in currency seemingly carries less risk, mo…
> but as an individual or institutional investor why would you ever want to hold something with negative interest instead of cash? There are no effective ways besides these bonds to hold tens or hundreds of millions of dollars as cash, even if you hire a warehouse, security, and store pallets of fiat (which has been attempted). You are paying a premium for principal safety. You either make this choice voluntarily as…
This, coupled with the pure speculation that before the bonds mature there will be a 'bigger investor' paying more (pushing the yield lower and the value higher).