Ever since deflation has become a threat in a new trend of secular stagnation in Western economies, rates have been under enormous pressure in debt markets.
In fact, ONE THIRD of euro-area government bonds are at NEGATIVE yields. This is a tremendous and unprecedented occurance. As rates continue to go negative, depositors are paying banks to protect their money and asset-rich entities are able to get PAID for borrowing money!
Finally, over in Japan, last month it sold a 10-year bond at negative yield That means that they are being paid to borrow money, even when their debt to GDP ratio is over 200%. Clearly the fiat system is upside down right now and they don't know how to even manage it properly.
In this environment where you are being taxed just for having a bank deposit in Europe, bitcoin will surely get more bullish. Bitcoin will never have negative interest rates, and in July we hill have a block reward halvening which will slow the increase in supply as we reach the 21 million cap.
FT has a paywall so you can read the text below:
A German bank has become the first non-state borrower to issue euro denominated debt at a negative yield, another milestone as the continent’s financial system moves further into the world of sub-zero interest rates.
The issuance comes ahead of a European Central Bank meeting this week when the effect of negative interest rates will be in the spotlight
Berlin Hyp issued €500m of covered bonds with no coupon and priced to yield minus 0.162 per cent on Tuesday, according to Bloomberg data. That means investors are guaranteed to lose money if they hold the bonds to maturity.
Covered bonds are issued by banks and are viewed as one of the safest corners of debt markets, because in case of default, buyers have recourse both to the bank itself and a pool of underlying assets. The debt instruments date back to 18th century Europe and play a major role in funding bank activity across the continent.
Other covered bonds are trading at negative yields in secondary markets, but the Berlin Hyp deal marks the first time yields have been negative at the point of initial sale.
Investors are in effect paying the bank to look after their money for three years. “It feels counter-intuitive,” said Joost Beaumont, a strategist at ABN Amro. “You invest in something and you already know the return will be negative.”
The European Central Bank has bought nearly €160bn of covered bonds since late 2014, as part of its third programme to buy such debt. Investors have complained that the central bank’s actions have distorted the market pushing yields down.
Covered bond purchases have formed a part of the ECB’s broader asset purchases, including sovereign quantitative easing, which are designed to shrink yields and boost the economy.
In government bond markets, sub-zero yields account for around one quarter of JPMorgan’s global index while countries including Japan, Germany, France and Poland have sold debt at negative yields,
“Investors who normally buy government bonds are faced with much more negative yields, so for them it becomes attractive to switch to covered bonds,” said Mr Beaumont.
Rates have fallen further this year. Borrowing costs in global financial markets have collapsed as central banks in Europe and Japan introduced negative interest rates in an effort to ward off deflation and stimulate growth.
This week, the European Central Bank is expected to cut a key interest rate further below zero to a new low of minus 0.4 per cent.
In a torrid start to the year for bank shares and bonds, covered bonds have also benefited from a flight to safety, with issuance rising.