I was attempt to describe the ramifications of negative interest rates across benchmarks.

I can foresee the business practice changes amongst holders of government bonds, savings accounts, certificates of deposit and mortgages. My conclusion was a possible stall of lending in those markets, but thats a red herring to my real question. When it comes to corporate debt I wasn't so sure what ramification even lower interest rates would have on the attractiveness of investment grade corporate debt.

Is there anywhere I can read prevailing or new theories about that?


1 Answer 1


Decreasing the nominal interest rate to a negative value will cause businesses to have to raise their prices in order to maintain 0 economic profit. This is because wages are "sticky," and cannot change in a general quarterly or annual period. People who live in the country have not been given any higher incentive to spend, but since prices are increased - aggregate demand will decrease. Additionally, in order to survive the cut in demand and rise in prices, firms will look to lay off workers - raising unemployment. Consumption should decrease as a result of a negative interest rate charged by the Central Bank. In what was an attempt to increase GDP - output will decrease. --> Stagflation is likely to occur

  • $\begingroup$ the question is about corporate debt, I now realize how unclear that is in my original post $\endgroup$
    – CQM
    Commented Apr 14, 2016 at 16:14

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