Your First Run-In With Negative Interest Rates?

Although they have been deployed across the globe in various places and at various times, including now, negative interest rates are not generally seen as a likely solution for the U.S. economy. Still, even with the Federal Reserve’s stated opposition to them, the potential for negative rates given the extreme market volatility prompted in March by COVID-19 remains top of mind for many in the financial services industry.  

This includes securities lending participants, who are concerned about the possibility of negative yields on cash collateral reinvestment funds and repurchase agreements—and how that could impact the economics of lending securities. They understand that, even if a negative rate environment is not probable, it is necessary to study how such a policy could impact their business, and to be prepared for that possibility.   

Negative interest rates could affect every aspect of securities lending, including borrower demand, investment valuation, taxation, accounting, operating models, and more. This paper is a guide for agent lenders and direct lenders in assessing the implications of negative interest rates and their impact on negative cash reinvestment yields.  

negative interest cover


Click here to download a copy of the PDF.