Financial institutions flush with cash have flocked to the Federal Reserve's reverse repurchase (RRP) facility, loaning the U.S. central bank money at 0% interest and raising concerns in the bond market that key short-term interest rates could actually fall below zero.
While banks haven’t passed on negative rates to retail accounts, they’ve been willing to do so for corporate ones. U.S. banks will preserve their spreads as much as possible by doing the same. I suspect this expectation will drive some unique corporate behavior as they attempt to reduce cash balances held in the U.S. to avoid potentially being charged to park their money at a bank.
0% interest rate. The banks have ZERO risk
Financial institutions flush with cash have flocked to the Federal Reserve's reverse repurchase (RRP) facility, loaning the U.S. central bank money at 0% interest and raising concerns in the bond market that key short-term interest rates could actually fall below zero.
Leading Up to Negative Rates
While banks haven’t passed on negative rates to retail accounts, they’ve been willing to do so for corporate ones. U.S. banks will preserve their spreads as much as possible by doing the same. I suspect this expectation will drive some unique corporate behavior as they attempt to reduce cash balances held in the U.S. to avoid potentially being charged to park their money at a bank.