The world better get used to negative rates

Today, around US$10 trillion (S$13.5 trillion) of bonds are trading at negative yields, mainly in Europe and Japan. In the next recession, US interest rates, too, may enter negative territory: Short-term rates are currently running around 2.5 per cent, and cuts of between 3 per cent and 5 per cent are commonly needed to restart economic activity.

In markets where rates are even lower or already negative, rates will need to go deeply into the red.

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A version of this article appeared in the print edition of The Straits Times on April 02, 2019, with the headline 'The world better get used to negative rates'. Print Edition | Subscribe