Читать книгу Investing All-in-One For Dummies - Eric Tyson - Страница 55

In the aftermath of the 2008 financial crisis, interest rates were at rock-bottom levels. And then they went even lower in some countries. In fact, in a number of European countries and Japan, interest rates have at times been negative — as in less than zero.

What the heck is a negative interest rate, and what exactly does that mean? Normally, when an investor buys a government bond for, say, $10,000, the bond issuer pays the investor interest — such as 3 percent per year. So, the investor would get paid $300 of interest annually. Suppose the governments of Germany, Japan, or Switzerland issue $10,000 bonds that have a negative interest rate — at, say, minus 1 percent per year. In that case, those bond buyers would pay the government bond issuer $100 per year for the privilege of holding their bond!

Why on earth would an investor ever willingly agree to buy a bond with a negative interest rate? It can happen in a country where there’s low demand for borrowing money (due typically to a weak economy) and where investors are more concerned with preserving their money than they are with risking and attempting to grow their money. By literally paying a person or company to borrow money, negative rates may encourage people to take risks/actions that can help the economy.

One final perceived benefit of negative rates is that they are viewed as leading to devaluing that country’s currency. Foreign investors generally aren’t going to be lining up to buy bonds with a negative interest rate! In theory, a devaluing currency helps a country with lowering the effective price of its exports.