On August 16, the yield on the Swiss 10-year bond fell to -1.132%. Consider the implications.

Swiss Bond Yield Calculation

Calculation from numbers I plugged into MoneyChimp.

Someone "investing" in Swiss government bonds rates will get back about 89 cents, ten years from now, for every dollar invested today.

Logically Impossible

This is logically impossible, yet, it's happening.

There's far worse.

Price of Austria 100-Year Government Bond


The 100-year bond trades at 200% of par. You get half your money back if you live long enough.

Madness? You bet.

17 Trillion in Negative Yield Bonds

Bloomberg discusses Ways to Profit From $17 Trillion of Negative-Yielding Debt

The article mentions three ways to play.

  1. Carry and Roll
  2. Currency Hedging
  3. Playing the slope of the curve in one currency vs another

My suggestion: Don't.

The article did not mention risk. This is not "free money" as the article makes it appear.

The chart below shows one of the ways such schemes to pick up a few basis points can go hugely wrong in a hurry.

How Losses Can Build Quick


As a technical point, the loss would be +37.8% not -37.8%. The return would be -37.8%.

In addition to yields blowing up, currency moves can also get out of hand and hedges aren't perfect.

Some hedge funds are going to get burnt badly doing what the Bloomberg article suggests.

Currency Wars and Monetary Madness

17 trillion in negative-yield debt is proof of currency wars and monetary madness.

Globally, central banks want to cram more debt into a monetary system that is choking on debt.


Meaning of Zero

"Zero Has No Meaning" Says Greenspan: I Disagree, So Does Gold

Alan Greenspan is wrong. Zero is very meaningful with negative being even more meaningful.


Brick Wall

Negative yields mean central banks have hit a brick wall.

They cannot cram any more debt into the system. There is no tolerance for paying interest.

The evidence is overwhelming.

  1. More Currency Wars: Swiss Central Bank Poised to Cut Interest Rate to -1.0%
  2. Inverted Negative Yields in Germany and Negative Rate Mortgages.
  3. Fed Trapped in a Rate-Cutting Box: It's the Debt Stupid

This material is based upon information that Sitka Pacific Capital Management considers reliable and endeavors to keep current, Sitka Pacific Capital Management does not assure that this material is accurate, current or complete, and it should not be relied upon as such.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD extends recovery beyond 1.1050 on Saudi output headlines

News indicating that Saudi Arabia’s oil output would return to normal quicker than expected, lifted the market’s mood and weighed on the greenback. EUR/USD underpinned by improved Business Sentiment according to the German ZEW Survey.


GBP/USD rallies past 1.2500, reaches fresh multi-week highs

The GBP/USD pair is trading above the 1.2500 figure, getting a boost from easing demand for the greenback following relief news related to the crude oil market after the weekend attack to Saudi facilities.


USD/JPY drops back to recent range after hitting fresh 6-week highs

The USD/JPY pair spiked to 108.35, reaching the highest intraday level since August 1st and then pulled back to the 108.15/20 area.


Saudi Arabia's oil output to be fully back online in next 2-3 weeks

Citing two sources briefed on the Saudi oil operations, Reuters reported that Saudi Arabia's oil output would return to normal levels quicker than initially thought.

Read more

Gold struggles to find direction, trades in tight range near critical $1,500 handle

The XAU/USD pair struggling to make a decisive move on Tuesday and continues to trade in a relatively tight range around the $1,500 handle.

Gold News

Forex Majors