CNBC: End of Financial 'Ice Age' Will Take US Interest Rates Below Zero, Strategist Predicts

February 11, 2020

Article by Jeff Cox in CNBC financial

Negative interest rates that have spread through Europe and Japan are coming soon to the U.S., according to a Societe Generale strategist.

A “deflationary bust” in which officials pour still more money into the system will take the benchmark U.S. 10-year Treasury note to minus-1% and 30-year bond yields negative as well, the firm’s Albert Edwards contends in an analysis on the state of financial markets.

In the consistently bearish strategist’s latest note to clients, Edwards takes on the “new level of fiscal debauchery for the U.S.” that he said will continue as policymakers look for ways to maintain the recovery.

Edwards said he is “now more convinced than ever before that the coming deflationary bust will take the US 30y yield below zero. I am also convinced that helicopter money will be the chosen way out of this deflationary quagmire, especially as it becomes increasingly clear that there is now no way left to reverse every government’s exploding fiscal liabilities. The Ice Age is nearing the end.”

Negative rates happen when bond investors pay such a high premium on bonds that their coupon returns actually cause them to lose money by lending it to the government. Negative deposit rates also are common in these areas.

President Donald Trump has said he would like to try negative rates in the U.S.

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