Saturday, October 19, 2019

Jamie Dimon Calls Negative Rates ‘Irrational’

Jamie Dimon
JPMorgan Chase chief executive Jamie Dimon has said he would “do anything” to avoid buying “irrational” negative interest rate bonds.

“I would not buy debt at
 below zero,”  Dimon told the annual meeting of banks’ lobby group, the Institute of International Finance. “Never, not at below zero, not in my entire life . . . I would do anything before I would buy debt at negative rates. There is something irrational about it.”

Dimon has a point. But if real rates are extremely low, say, 0.02%, then it may make sense to buy a triple-A security with a negative rate of 0.01% if the only alternative is storing physical cash which might cost storage fees and security fees of more than 0.03%.


1 comment:

  1. The other reason that it might make sense to buy negative-interest-rate bonds is if you believe that there will be a higher bid for them later, either from private firms or the state (i.e., you don't have to hold them to maturity). In fact, I'll bet that some of Dimon's traders are doing this as we speak.