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Warning: Bond rates are going negative
CNN Money ^ | 15 January 2015 | Matt Egan

Posted on 01/15/2015 6:38:42 PM PST by MeneMeneTekelUpharsin

Investors are so nervous that they are basically willing to lose money when they buy some government bonds. It's part of the latest fad in finance that's all the rage: "going negative." The yields on government bonds in Europe and Japan have dipped into the uncharted waters of negative territory. That means buyers of those bonds are essentially taking a loss just to hold onto those assets. They think their money is better off losing a few cents than putting it elsewhere. "It's basically a fee for fear," said Nicholas Colas, chief market strategist at ConvergEx. "Fear of deflation, fear of volatility in other capital markets and general fear of the known."

Below zero: Just look at Switzerland, where the yield on bonds fell further into negative territory this week after the country's central bank dropped a bombshell on investors by scrapping a currency cap. In addition to allowing the Swiss franc to trade freely against the euro, the Swiss National Bank lowered a key interest rate further into negative territory, from -0.25% to -0.75%. That's like a bank charging customers to park their money there instead of paying them interest. Switzerland isn't alone in going negative. The yield on short-term government bonds of Belgium, Denmark, France, Germany, Japan, and the Netherlands are all sub-zero. Even short duration U.S. bond rates are barely above zero.

Click here for rest of article.

(Excerpt) Read more at money.cnn.com ...


TOPICS: Business/Economy; Government
KEYWORDS: banks; bondmarket; bonds; deflation; euro; europe; negative; snb; swissfranc
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To: Alberta's Child

Follow up question. In that situation where *should* folks be putting their cash?


21 posted on 01/15/2015 7:18:12 PM PST by o2bfree (Note to GOP Establishment Liberals: No more continuing budget resolutions!!!)
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To: o2bfree
In a deflationary cycle the best place to put the cash is in your mattress (metaphorically speaking). If prices and values fall, then your cash will be worth more (in terms of purchasing power) tomorrow than it is today.

This is all a hypothetical discussion, of course. The government of this country will go to whatever lengths necessary to prevent this type of scenario. Many of the government policies that prevail under both Democratic and Republican leadership are aimed precisely at warding off a deflationary cycle here in the U.S. Two policies in particular that fit this description -- "open borders" and "free trade" -- are perfect examples of this.

22 posted on 01/15/2015 7:22:50 PM PST by Alberta's Child ("It doesn't work for me. I gotta have more cowbell!")
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To: Alberta's Child
Two policies in particular that fit this description -- "open borders" and "free trade" -- are perfect examples of this.

I don't think free trade and open borders helps deflation. LOL. If anything they decrease prices and wages. A double bagger deflator.

23 posted on 01/15/2015 7:31:04 PM PST by central_va (I won't be reconstructed and I do not give a damn.)
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To: MeneMeneTekelUpharsin
This is solid evidence that the very wealthy in the know realize the house of cards is about to fall.

I think they've known it for a long time.

24 posted on 01/15/2015 7:34:27 PM PST by dragnet2 (Diversion and evasion are tools of deceit)
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To: central_va
The purpose of open borders is to increase demand for products and services by bringing more "customers" here into the U.S.

The purpose of free trade is to prop up the value of the U.S. dollar by increasing the number of businesses and customers around the globe who use the dollar for conducting business.

25 posted on 01/15/2015 7:34:45 PM PST by Alberta's Child ("It doesn't work for me. I gotta have more cowbell!")
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To: Alberta's Child
The purpose of open borders is to increase demand for products and services by bringing more "customers" here into the U.S.

They dilute the labor pool lowering wages. This is deflationary.

The purpose of free trade is to prop up the value of the U.S. dollar by increasing the number of businesses and customers around the globe who use the dollar for conducting business.

We save a few pennies on the dollar on imported retail prices. This is deflationary too.

26 posted on 01/15/2015 7:37:29 PM PST by central_va (I won't be reconstructed and I do not give a damn.)
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To: MeneMeneTekelUpharsin

PGP 11+% a year -— pays monthly. Sells at a market premium of +50% of nav but it has for the last 10 years.


27 posted on 01/15/2015 7:39:00 PM PST by jyro (French-like Democrats wave the white flag of surrender while we are winning)
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To: jyro

https://investments.pimco.com/Products/pages/678.aspx

PGP


28 posted on 01/15/2015 7:42:21 PM PST by jyro (French-like Democrats wave the white flag of surrender while we are winning)
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To: central_va
They dilute the labor pool lowering wages. This is deflationary.

No, it's not. If I have 10 employees earning $20/hour and I replace them with 50 employees earning $5/hour, my employees now have an extra $50/hour in purchasing power.

We save a few pennies on the dollar on imported retail prices. This is deflationary too.

And we purchase more products at the lower prices than we did at the higher prices. People living below the poverty line in the U.S. today have a better standard of living than someone in the middle class did even as recently as 25-30 years ago.

29 posted on 01/15/2015 7:43:03 PM PST by Alberta's Child ("It doesn't work for me. I gotta have more cowbell!")
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To: Alberta's Child
So we dilute their wages and off shore their jobs but they are better off? I believe you are what I call a Free traitor. Good evening.
30 posted on 01/15/2015 7:46:31 PM PST by central_va (I won't be reconstructed and I do not give a damn.)
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To: Alberta's Child

The purpose of open borders is to increase TAXES and they do that by bringing more “customers” here into the U.S.


31 posted on 01/15/2015 7:46:52 PM PST by dragnet2 (Diversion and evasion are tools of deceit)
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To: central_va

There used to be negative amortization mortgages. You could pay on it for ten years and end up owing more than when you started. They were outlawed after the S&L crises in the early 90s.

It was a beeeatch. People couldn’t refinance ‘cause their homes didn’t appraise for what they owned on it.


32 posted on 01/15/2015 7:47:58 PM PST by VerySadAmerican (Obama voters are my enemy. And so are republican voters.)
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To clarify;

The purpose of open borders is to increase TAX REVENUE and they do that by bringing more “customers” here into the U.S.


33 posted on 01/15/2015 7:48:16 PM PST by dragnet2 (Diversion and evasion are tools of deceit)
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To: Alberta's Child

Thanks!


34 posted on 01/15/2015 7:49:50 PM PST by billys kid (My beloved is mine and I am thine...)
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To: MeneMeneTekelUpharsin

buy a bond and lose money... that oughtta sell a lot of bonds, lol


35 posted on 01/15/2015 7:52:11 PM PST by GeronL
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To: central_va

I didn’t say it was a good idea. I’m saying that’s how it works.


36 posted on 01/15/2015 7:56:56 PM PST by Alberta's Child ("It doesn't work for me. I gotta have more cowbell!")
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To: dragnet2

That’s part of it ... because government is one of the “industries” that constantly needs more customers.


37 posted on 01/15/2015 7:57:57 PM PST by Alberta's Child ("It doesn't work for me. I gotta have more cowbell!")
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To: Alberta's Child

Part of it?

Get real...


38 posted on 01/15/2015 8:02:42 PM PST by dragnet2 (Diversion and evasion are tools of deceit)
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To: dragnet2

I can assure you that the U.S. Chamber of Commerce doesn’t give a flying crap about tax revenue when they spend millions of dollars lobbying in Washington for open borders.


39 posted on 01/15/2015 8:07:31 PM PST by Alberta's Child ("It doesn't work for me. I gotta have more cowbell!")
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To: Alberta's Child
Horseshit...Screw the chamber of commerce...A bunch of over paid corrupt AHs on the tax teet. Nothing more. It's all about dividing the united, more tax revenue and whatever works for their private borderless global dreams of total control. Bringing in an endless conga-line of illegals by the tens of millions, is only propping up the corrupt tent for a bit longer. Make um legal? LOL...Thats just to get um registered to pay more taaaaxes. Even if it takes 5 illegals to match what 1 middle American used to make in old America.

I hope this wasn't too insensitive.

40 posted on 01/15/2015 8:19:10 PM PST by dragnet2 (Diversion and evasion are tools of deceit)
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