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How negative can interest rates go

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How negative can interest rates go? Gavyn Davies, writing for the FT, says As global bond yields plumb new depths, an unprecedented experiment in monetary policy is underway in two small countries in Europe. By pushing policy interest rates more deeply into negative territory than ever seen before, the Swiss and Danish central banks are testing where the effective lower bound on interest rates really lies. The Danish central bank cut interest rates to -0.5 per cent last week, the third cut in the last two weeks. The Swiss National Bank cut its deposit rate to -0.75 per cent when it recently removed the ceiling on the Swiss franc. Money market rates in Switzerland have fallen to a low of -0.96 per cent. Bond yields have followed suit, right across the curve (see graph). Those who believed that long bond yields could not go negative have had a rude awakening. (VIEW LINK)


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