Negative interest rates, page-4

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Bruno81

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08/08/19

19:39

Post #: 39931810
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Originally posted by Menta ↑

There is now more than $14 trillion of negative-yield debt outstanding. The bonds of Germany, Denmark, Switzerland, Sweden & Japan trade at negative yields. Every day more and more junk bonds are trading at negative yields. So even high-risk companies are now getting paid to borrow money!

This growing trend is a symptom of the strengthening of the underlying deflation in debt markets worldwide. Australia & NZ recently cut their OCR to record lows of 1%. This is a global deflationary trend and central banks are becoming impotent in preventing it - and the deflationary crash to follow.

Buyers of negative-yield debt have zero margin of safety. When interest rates rise, the value of their bonds will plummet. The current global bubble in all risk assets - stocks, bonds, property, commodities - was fuelled by cheap & easy credit. The burgeoning credit contraction, and subsequent debt deflation, will burst the bubbles of all assets worldwide. When the masses finally realise what's happening it will be too late to prepare.

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What if interest rates never go up? I've been saying for ages to people that when interest rates go up prices for property etc will come down so be careful how much you borrow. I'm starting to change my mind now, what if they never go up again, Japan has got away with it for 30 years now, I know it's crazy but what if crazy is the new norm in Australia for the next 30 years?
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