Question

What are negative interests of fixed debt financial instruments? Provide Three specific examples? How and why do they occur?

Answer 1

When borrowers get interest rather than paying interest to the lenders its negative interest. For example, if you have invested in mutual funds in the month of February but instead of getting the return of 8-9% you are losing the money and due to negative interest rates, but why this happens. This happens at the time of recession when the whole economy of the country is suffering and people are taking out their money which is invested in the stock market and the price of the share starts falling down due to which the mutual funds who have invested your money in the market start earning negative interest rates and provide you with there same.

three examples of this condition are :

1.) the recession of 2008

2.) the note printing scandal of zimbabwe

3.) presently due to coronavirus 2020

simply it occurs when the inflation rate exceeds the nominal interest rates, the nominal interest rate becomes less than zero so banks and other firms have to pay interest to store their funds at the central bank, rather than earning interest. It happens when it is rush and desperate efforts made to boom the economy by financial strengths and methods or during the recession times.

sometimes people don't spend their money rather keep them holding this results in slow down and  in this condition the interest rates are turned negative so that the people will take out their money and spend it.