The Non-Weirdness of Negative Interest Rates
Savers in Europe are having to pay to store their wealth. That’s not so crazy when saving is all too plentiful.
Take a deep breath. Some things look strange at first but actually make sense.
Photo Illustration by 731. Photos: Getty Images (6)
German government bonds with maturities going out to 30 years now trade with negative interest rates. UBS Group AG plans to charge an annual fee of 0.6% for some wealthy clients to hold their money. In Denmark, a bank is selling, for the first time, a mortgage-backed note that carries a negative coupon.
Negative rates are showing up everywhere, seemingly turning on their heads traditional notions of lending and borrowing. Negative yields just don’t seem to make any sense. A lender is supposed to get paid to part with capital, while a borrower is supposed to pay to use that cash for some purpose. It seems crazy that anyone would voluntarily part with their money, only to end up with less of it.