Negative Interest Rate
A negative interest rate means the central bank and perhaps private banks will charge negative interest: instead of receiving money on deposits, depositors must pay regularly to keep their money with the bank. This is intended to incentivize banks to lend money more freely and businesses and individuals to invest, lend, and spend money rather than pay a fee to keep it safe. For more information Click Here.
A high-yield investment with a hand grenade attached. A security carried gingerly with the hope that it won’t explode, leaving investors in a hole. CoCo bonds are designed to harness this “wisdom of the crowd” by putting bondholders on the front line, giving them a vested interest in the health of wobbly banks. The problem is that they are untested: When the first one goes sour and halts coupon payments, it’s possible investors could suddenly wake up to the inherent risk and flee all CoCos, destabilizing the corporate bond market and possibly even the financial system. For more information Click Here.
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