In 1987, the then Federal Treasurer Paul Keating remarked that if you went into your local pet store, you would find the galah talking about microeconomic reform. In 2019, those same galahs (they can live up to 40 years) must surely be talking about negative interest rates.

There are currently US$16.4 trillion of securities with a negative yield (Bloomberg, September 2019), accounting for around one-third of the global tradeable bond universe. This includes German government bonds with a maturity of 30 years, and even some European “high yield” bonds.


Source: Bloomberg as of 3 September 2019

So far Australia has avoided negative interest rates (in nominal terms, ie not adjusting for inflation). However, with the Reserve Bank of Australia having recently reduced interest rates twice, and with interest rate markets pricing the possibility of a further 25 basis point cut by the end of the year, it may be timely to ask whether or not we are likely to see investors having to pay to store their cash in Australia.