Interest rates threaten to turn negative again

According to a survey by the FAZ, banks are preparing for a negative return on ten-year Bunds. The negative deposit rates for large savings could also soon be history. What does that mean for consumers?

Should the euro zone slide into recession, negative interest rates could persist in the long term.

Et was a sensation when it turned negative for the first time in history in June 2016: the yield on the ten-year government bond, the most important benchmark for capital market rates in Germany. Now it is not very far from the zero line again. On Monday the return was 0.11 percent, on Friday even only 0.085 percent at times. Many banks are now preparing for negative capital market rates again, as a FAZ survey of financial institutions revealed on Monday.

“An at least temporary decline in the yield on ten-year Bunds to below 0 percent is quite possible,” says Andrew Bosomworth, the head of wealth manager Pimco in Germany. Jörg Krämer, Commerzbank’s chief economist, shares the opinion and gives three reasons for this: First, the economic data are likely to continue to be poor. Second, Brexit and the trade war between the United States and China continued to create high levels of uncertainty. And thirdly, the European Central Bank (ECB) is likely to loosen its monetary policy further and will probably decide on new long-term loans for banks at its next meeting in March, and it will also extend its promise of unchanged key interest rates by half a year until winter 2019/20.