Saturday , October 19 2019
Home / The Angry Bear / The Expansion Of Assets With Negative Nominal Interest Rates

The Expansion Of Assets With Negative Nominal Interest Rates

Summary:
The Expansion Of Assets With Negative Nominal Interest Rates Buried in the Weekend section of the Financial Times is a report that the aggregate value of assets that earn negative nominal yields has substantially expanded since the beginning of 2019 and has reached a new high.  So on January 1, 2019, the value of these assets was at .3 trillion.  As of six months later it had reached trillion, a more than 50 percent increase.  There are fewer assets around that have negative yields than a few years ago, but the amount of money in them has grown, and the depth of some of the negative interest rates has deepened.  It used to be said that -0.5 percent was a lower bound, but some Swiss franc bonds are down to -0.8 percent.  The main ten year German

Topics:
Barkley Rosser considers the following as important:

This could be interesting, too:

Barkley Rosser writes An Increasingly Divergent US Economy

NewDealdemocrat writes Positive housing, initial claims, and Philly Fed outweigh negative industrial production

Peter Dorman writes A Nobel for the Randomistas

Dan Crawford writes Weekly Indicators for October 7 – 11 at Seeking Alpha

The Expansion Of Assets With Negative Nominal Interest Rates

Buried in the Weekend section of the Financial Times is a report that the aggregate value of assets that earn negative nominal yields has substantially expanded since the beginning of 2019 and has reached a new high.  So on January 1, 2019, the value of these assets was at $8.3 trillion.  As of six months later it had reached $13 trillion, a more than 50 percent increase.  There are fewer assets around that have negative yields than a few years ago, but the amount of money in them has grown, and the depth of some of the negative interest rates has deepened.  It used to be said that -0.5 percent was a lower bound, but some Swiss franc bonds are down to -0.8 percent.  The main ten year German government bond’s yield has fallen to -0.4 percent.

This reflects a general decline of interest rates around the world.  This would seem to be tied to a general slowdown in the growth of the world economy.  One of the most sharply shifting economies is that of Germany, in recent years the fastest growing in the EU, but apparently in negative GDP growth territory for the second quarter of 2019.  This is not a good sign for the entire European economy.  Of course, China has also been slowing down.

This general slowdown has spilled over into US long term interest rates, which the Fed really does not control.  Indeed, for only the seventh time since 1980, the ten-year Treasury bond’s yield dipped below the federal funds rare, a more dramatic inversion of the yield curve than we have seen so far, with the US economy going into recession soon after this inversion five out of the six previous times this happened. So this is not a definite sign of recession, but it is quite understandable that the Fed is now talking lowering short term rates, and not just because Trump is shouting at them to do so.

Barkley Rosser

Barkley Rosser
I remember how loud it was. I was a young Economics undergraduate, and most professors didn’t really slam points home the way Dr. Rosser did. He would bang on the table and throw things around the classroom. Not for the faint of heart, but he definitely kept my attention and made me smile. It is hard to not smile around J. Barkley Rosser, especially when he gets going on economic theory. The passion comes through and encourages you to come along with it in a truly contagious way. After meeting him, it is as if you can just tell that anybody who knows that much and has that much to say deserves your attention.

Leave a Reply

Your email address will not be published. Required fields are marked *