Focus: Negative interest rates

Short Url
Updated 13 May 2020
Follow

Focus: Negative interest rates

What happened:

Comments by the White House Coronavirus Taskforce’s Dr. Anthony Fauci and veteran investor as well as Duquesne Capital chairman Stanley Druckenmiller sent equity markets down.

Fauci informed the US Senate’s health committee of big risks if states reopened their economies without observing guidance on the coronavirus disease (COVID-19) pandemic. He said that opening up the economy too soon could “trigger an outbreak that you might not be able to control,” resulting in loss of life and economic contraction.

Druckenmiller told The Economic Club of New York that the risk-reward ratio in equities was the worst he had ever seen and called a V-shaped recovery “a fantasy.” He expressed fears that the pandemic would have a long-lasting effect on the economy, leading to bankruptcies.

He regards the massive government stimulus as merely a transfer of money to individuals as well as leading to maintaining zombie companies and has predicted more regulation and higher taxes going forward.

The UK economy entered recession, contracting by 5.8 percent in March. Retail sales were down 20 percent for the same month. The first quarter (Q1) of the year only reflects two weeks of lockdown, which means there is worse to come in Q2. British Chancellor of the Exchequer Rishi Sunak extended the furlough program by four months, costing an extra £34 billion ($41.9 billion).

The Reserve Bank of New Zealand (RBNZ) doubled its quantitative easing program to NZ$60 billion ($36.3 billion), contemplating lowering interest rates further, including into negative territory.

Indian Prime Minister Narendra Modi announced a $265 billion stimulus package, equal to 10 percent of GDP. Benchmark yields fell by 20 basis points to 6.16 percent in the last two sessions.

Earnings season continued in Europe:

Dutch business bank ABN Amro posted a Q1 loss of minus 395 million euros (minus $429 million), the first in seven years. Loan loss provisions and impairment for Q1 were 1.1 billion euros and could go up to 2.5 billion euros for the full year.

German universal bank Commerzbank posted a loss of 277 million euros, which included a markdown worth 479 million euros in assets due to the pandemic. Full-year loan loss provisions went up to 1.4 billion euros, rendering a profit for 2020 challenging.

Revenue at Danish shipping giant A.P. Moller-Maersk A/S increased to $9.57 billion, with earnings before interest, taxes, depreciation, and amortization (EBITDA) at $1.52 billion. The company warned that the COVID-19 pandemic could drive sea freight volumes down by as much a quarter.

CEO Soren Skou said that given its 20 percent market share in the container trade, Maersk would only be contemplating mergers and acquisitions activity landside, for example, in logistics and container ports.

Background:

With the RBNZ contemplating negative rates, the conversation moved again to the potential of US rates turning negative by 2021. Speculation was fueled by a tweet from American President Donald Trump calling negative rates a “GIFT.”

The question remains how the US Federal Reserve looks at rates. Trump sees the rate conundrum in parts through the lens of their impact on the dollar, with a cheaper dollar being beneficial to exports. The experience of the Japanese yen and the Swiss franc would suggest that negative rates did not affect their safe haven status in the long run.

While the last two months have seen a significant dollar appreciation, the trend could have reached its end.

The risk-reward picture for negative interest rates looks different from country to country. In the US, the impact on money markets has to be considered, which is of lesser importance in other jurisdictions.

Furthermore, negative interest rates have not had the desired effect of stimulating the economy and reaching target inflation rates in either Japan or the eurozone. Rather, they had a negative impact on the business models of banks, reducing their efficiency as transmission mechanisms.

The bond market effortlessly absorbed the arrival of a record-sized $32 billion 10-year treasury note auction on Tuesday. Demand was solid among investors at a record-low yield of 0.7 percent for the new 10-year note.

The global importance of US treasuries beyond that asset class cannot be overstated. Government bond yields in major economies reflect the return expectations by investors without taking risk. This holds particularly true for US treasuries, which are by far the most liquid and issued by the government of the world’s largest economy, hence building a foundation for the relative pricing of all asset classes.

Where we go from here:

The US Congress will be discussing a $3 trillion rescue package, where democrats have earmarked $1 trillion for cities and states, with the some of the remainder going toward “hazard pay” for essential workers and a new round of cash payments to individuals.

Senate Majority Leader Mitch McConnell is more interested in legislation protecting businesses from liability for returning employees if they fall ill or die.

US Federal Reserve Chairman Jerome Powell will speak at the Peterson Institute later on Wednesday. European Commission President Ursula von der Leyen and European Council President Charles Michel will address the European Parliament in the afternoon.

 

— Cornelia Meyer is a Ph.D.-level economist with 30 years of experience in investment banking and industry. She is chairperson and CEO of business consultancy Meyer Resources.
Twitter: @MeyerResources


Iran could again enrich uranium 'in matter of months': IAEA chief

Updated 1 min 57 sec ago
Follow

Iran could again enrich uranium 'in matter of months': IAEA chief

  • “They can have, you know, in a matter of months, I would say, a few cascades of centrifuges spinning and producing enriched uranium, or less than that,” Grossi said Friday, according to a transcript of the interview released Saturday

WASHINGTON: UN nuclear watchdog chief Rafael Grossi says Iran likely will be able to begin to produce enriched uranium “in a matter of months,” despite damage to several nuclear facilities from US and Israeli attacks, CBS News said Saturday.
Israel launched a bombing campaign on Iranian nuclear and military sites on June 13, saying it was aimed at keeping Iran from developing a nuclear weapon — an ambition the Islamic republic has consistently denied.
The United States subsequently bombed three key facilities used for Tehran’s atomic program.
Iranian Foreign Minister Abbas Araghchi says the extent of the damage to the nuclear sites is “serious,” but the details are unknown. US President Donald Trump insisted Iran’s nuclear program had been set back “decades.”
But Grossi, the director general of the International Atomic Energy Agency, said “some is still standing.”
“They can have, you know, in a matter of months, I would say, a few cascades of centrifuges spinning and producing enriched uranium, or less than that,” Grossi said Friday, according to a transcript of the interview released Saturday.
Another key question is whether Iran was able to relocate some or all of its estimated 408.6-kilo (900-pound) stockpile of highly enriched uranium before the attacks.
The uranium in question is enriched to 60 percent — above levels for civilian usage but still below weapons grade. That material, if further refined, would theoretically be sufficient to produce more than nine nuclear bombs.
Grossi admitted to CBS: “We don’t know where this material could be.”
“So some could have been destroyed as part of the attack, but some could have been moved. So there has to be at some point a clarification,” he said in the interview.
For now, Iranian lawmakers voted to suspend cooperation with the IAEA and Tehran rejected Grossi’s request for a visit to the damaged sites, especially Fordo, the main uranium enrichment facility.
“We need to be in a position to ascertain, to confirm what is there, and where is it and what happened,” Grossi said.
In a separate interview with Fox News’s “Sunday Morning Futures” program, Trump said he did not think the stockpile had been moved.
“It’s a very hard thing to do plus we didn’t give much notice,” he said, according to excerpts of the interview. “They didn’t move anything.”
US Secretary of State Marco Rubio on Saturday underscored Washington’s support for “the IAEA’s critical verification and monitoring efforts in Iran,” commending Grossi and his agency for their “dedication and professionalism.”
The full Grossi interview will air on “Face the Nation with Margaret Brennan” on Sunday.

 


G7 agrees to exempt US multinationals from global minimum tax

Updated 8 min 52 sec ago
Follow

G7 agrees to exempt US multinationals from global minimum tax

  • The deal will see US companies benefit from a “side-by-side” solution under which they will only be taxed at home

OTTAWA: The Group of Seven nations said Saturday they have agreed to exempt US multinational companies from a global minimum tax imposed by other countries — a win for President Donald Trump’s government, which pushed hard for the compromise.
The deal will see US companies benefit from a “side-by-side” solution under which they will only be taxed at home, on both domestic and foreign profits, the G7 said in a statement released by Canada, which holds the group’s rotating presidency.
The agreement was reached in part due to “recently proposed changes to the US international tax system” included in Trump’s signature domestic policy bill, which is still being debated in Congress, the statement said.
The side-by-side system could “provide greater stability and certainty in the international tax system moving forward,” it added.
Nearly 140 countries struck a deal in 2021 to tax multinational companies, an agreement negotiated under the auspices of the Organization for Economic Co-operation and Development (OECD).
That agreement, deeply criticized by Trump, includes two “pillars,” the second of which sets a minimum global tax rate of 15 percent.
The OECD must ultimately decide to exempt the US companies from that tax — or not.
The G7 said it looked forward to “expeditiously reaching a solution that is acceptable and implementable to all.”
On Thursday, US Treasury Secretary Scott Bessent had signaled that a “joint understanding among G7 countries that defends American interests” was in the works.
He also asked US lawmakers to “to remove the Section 899 protective measure from consideration in the One, Big, Beautiful Bill” — Trump’s policy mega-bill.
Section 899 has been dubbed a “revenge tax,” allowing the government to impose levies on firms with foreign owners and on investors from countries deemed to impose unfair taxes on US businesses.
The clause sparked concern that it would inhibit foreign companies from investing in the United States.


Israeli protesters urge action for Gaza hostages after Iran truce

Updated 41 min 26 sec ago
Follow

Israeli protesters urge action for Gaza hostages after Iran truce

  • A crowd filled “Hostages Square” in central Tel Aviv, waving Israeli flags and placards bearing the pictures of Israelis seized by Palestinian militants during Hamas’s October 7, 2023 attack on Israel

TEL AVIV: Thousands of demonstrators rallied in Israel on Saturday to demand that the government secure the release of 49 hostages still held in Gaza, AFP reporters saw.
It was the first rally by hostages’ relatives since Israel agreed a ceasefire with Iran on June 24 after a 12-day war, raising hopes that the truce would lend momentum to efforts to end the Gaza conflict and bring the hostages home.
Emergency restrictions in place during the war with Iran had prevented the normally weekly rally from taking place.
A crowd filled “Hostages Square” in central Tel Aviv, waving Israeli flags and placards bearing the pictures of Israelis seized by Palestinian militants during Hamas’s October 7, 2023 attack on Israel.
The deadly attacks prompted Israel’s Prime Minister Benjamin Netanyahu to launch a fierce military offensive in Gaza, vowing to crush Hamas and free the hostages.
Twenty months and several hostage exchanges later, 49 of those seized are still held in Gaza, including 27 the Israeli military says are dead — raising pressure on Netanyahu’s government.
“The war with Iran ended in an agreement. The war in Gaza must end the same way — with a deal that brings everyone home,” said the Hostages and Missing Families Forum, the main body representing the relatives, in a statement to mark the rally.
Some demonstrators called on US President Donald Trump to help secure a ceasefire in Gaza that would see the captives freed, hailing his backing for Israel in the conflict with Iran.
“President Trump, end the crisis in Gaza. Nobel is waiting,” read one placard, in reference to a possible peace prize for the US leader.
“I call on Prime Minister Netanyahu and President Trump,” one released hostage, Liri Albag, said at the rally.
“You made brave decisions on Iran. Now make the brave decision to end the war in Gaza and bring them home.”


Gaza aid system ‘leads to mass killings’

Updated 27 min 33 sec ago
Follow

Gaza aid system ‘leads to mass killings’

  • Thousands of Palestinians walk for hours to reach distribution sites, moving through Israeli military zones

GAZA CITY: UN officials said a US- and Israeli-backed distribution system in Gaza was leading to mass killings of people seeking humanitarian aid, drawing accusations from Israel that the UN was “aligning itself with Hamas.”

Eyewitnesses and local officials have reported repeated killings of Palestinians seeking aid at distribution centers over recent weeks in the war-stricken territory, where Israeli forces are battling militants.
The Israeli military has denied targeting people seeking aid, and the US- and Israeli-backed Gaza Humanitarian Foundation has denied that any deadly incidents were linked to its sites.

The new aid distribution system has become a killing field with people shot at while trying to access food for themselves and their families.

Philippe Lazzarini, Head of the UN agency for Palestinian affairs

But following weeks of reports, UN officials and other aid providers denounced what they said was a wave of killings of hungry people seeking aid.
“The new aid distribution system has become a killing field,” with people “shot at while trying to access food for themselves and their families,” said Philippe Lazzarini, head of the UN agency for Palestinian affairs , or UNWRA.

Palestinians mourn over the bodies of loved ones killed during overnight Israeli strikes, on the grounds of Al-Shifa hospital in the central Gaza Strip on June 28, 2025. (AFP)

“This abomination must end through a return to humanitarian deliveries from the UN, including @UNRWA,” he wrote on X.
The Health Ministry in the territory says that since late May, more than 500 people have been killed near aid centers while seeking scarce supplies.
Hungry Palestinians are enduring a catastrophic situation in Gaza.
Thousands of Palestinians walk for hours to reach the sites, moving through Israeli military zones.
The country’s civil defense agency has also repeatedly reported people being killed while seeking aid.
“People are being killed simply trying to feed themselves and their families,” said UN Secretary-General Antonio Guterres.
“The search for food must never be a death sentence.”
Medical charity Doctors Without Borders, or MSF, branded the GHF relief effort “slaughter masquerading as humanitarian aid.”
That drew an angry response from Israel, which said GHF had provided 46 million meals in Gaza.
“The UN is doing everything it can to oppose this effort. In doing so, the UN is aligning itself with Hamas, which is also trying to sabotage the GHF’s humanitarian operations,” the Foreign Ministry said.
Israel’s Prime Minister Benjamin Netanyahu rejected a newspaper report that the country’s military commanders ordered soldiers to fire at Palestinians seeking humanitarian aid in Gaza.
Left-leaning daily Haaretz had earlier quoted unnamed soldiers as saying commanders ordered troops to shoot at crowds near aid distribution centers to disperse them even when they posed no threat.
Haaretz said the military advocate general, the army’s top legal authority, had instructed the military to investigate “suspected war crimes” at aid sites.
The Israeli military declined to comment on the claim.
Netanyahu said in a joint statement with Defense Minister Israel Katz that their country “absolutely rejects the contemptible blood libels” and “malicious falsehoods” in the Haaretz article.
The military said in a separate statement it “did not instruct the forces to deliberately shoot at civilians, including those approaching the distribution centers.”
It added that Israeli military “directives prohibit deliberate attacks on civilians.”
Israel blocked deliveries of food and other crucial supplies into Gaza from March for more than two months.
It began allowing supplies to trickle in at the end of May, with GHF centers secured by armed US contractors and Israeli troops on the perimeter.
Guterres said that from the UN, just a “handful” of medical deliveries had crossed into Gaza this week.

 


Tehran remains committed to diplomacy, but ‘peace by force is not peace,’ Iran’s ambassador to Japan tells Arab News Japan

Updated 28 June 2025
Follow

Tehran remains committed to diplomacy, but ‘peace by force is not peace,’ Iran’s ambassador to Japan tells Arab News Japan

  • In exclusive interview, Peiman Seadat slams the US for siding with “aggressor” Israel, says Iran "now assessing the situation”
  • Sees growing alignment between Iran and Arab and Islamic states and “positive and constructive path” toward regional peace

TOKYO: From the only country ever targeted by atomic bombs, a senior Iranian diplomat has called for a return to diplomacy over destruction amid simmering nuclear tensions in the Middle East.

Peiman Seadat, Tehran’s ambassador to Japan, says his country remains open to dialogue but cautions that “peace by force is not peace” following recent attacks on its nuclear sites and failed negotiations.

In an exclusive interview with Arab News on Saturday, Seadat described genuine diplomacy as requiring “mutual respect, even on points of disagreement, equal footing, and a willingness to achieve a satisfactory outcome for parties involved.”

Iranian authorities are “now assessing the situation” and weighing options for resuming negotiations, he said.

Seadat’s remarks come amid simmering tensions following a 12-day conflict between Iran and Israel, which ended with a ceasefire on June 24.

Accusing both the US and Israel of choosing aggression over diplomacy, he said the attacks on Iran’s nuclear facilities were carried out two days before planned talks with the US, and thus have deepened a “legacy of distrust.”

“Rather than condemning the party that disrupted the negotiations, the Americans sided with the aggressor,” he said. “They, therefore, betrayed the very negotiation to which they were a party. 

“Accordingly, the conclusion is that they were complicit in the aggression, a fact they further proved when they launched attacks against our peaceful nuclear sites, thus joining the Israelis in gross violation of every tenet of international law.” 

In his first public remarks after the truce, Iran’s Supreme Leader Ayatollah Ali Khamenei declared victory, claiming Iran “slapped America in the face” by striking the Al-Udeid base in Qatar in retaliation for the US bombing of Iranian nuclear facilities.

Warning that any future attacks would prompt further strikes on American targets, he asserted Iran’s regional capabilities and rejected calls for concessions. 

Khamenei also downplayed the impact of the strikes on Iran’s nuclear facilities, claiming that the US acted mainly to protect Israel after Iranian missiles penetrated Israeli defenses. 

US President Donald Trump ridiculed Khamenei’s victory claims, insisting Iran had been “decimated” and its nuclear sites “obliterated” during the conflict. 

Trump said he had considered but ultimately rejected plans to assassinate Khamenei, claiming he “saved him from a very ugly and ignominious death” by stopping direct attacks from the US or Israel. 

He also said he halted plans to lift sanctions on Iran following Khamenei’s “blatant and foolish” statements and warned he would “absolutely” consider bombing Iran again if Tehran resumed nuclear enrichment at threatening levels. 

Trump further claimed to have pressured Israel to avoid delivering a “final knockout” blow, suggesting Israeli strikes could have targeted Tehran directly if not for US intervention. 

On Saturday, Iranian Foreign Minister Abbas Araghchi condemned Trump’s comments, saying a potential nuclear deal hinges on the US ending its “disrespectful tone” toward the supreme leader. 

“If President Trump is genuine about wanting a deal, he should put aside the disrespectful and unacceptable tone towards Iran’s Supreme Leader, Grand Ayatollah Khamenei, and stop hurting his millions of heartfelt supporters,” Araghchi posted on the social platform X. 

Seadat said that Iran remained committed to diplomacy, citing his country’s continued adherence to the 2015 nuclear deal and participation in talks until Israeli strikes derailed the process. 

“Iran has always been a party to genuine diplomacy, but peace by force is not peace; it is, rather, coercion,” he said. “What we wanted was a cessation of aggression, and we achieved it at this stage, with resolve. So, while we remain highly vigilant, we will see how the situation unfolds.” 

As diplomatic strains persist, Israeli officials have signaled a readiness to escalate. On June 26, Israeli Defense Minister Israel Katz told local media that Israel has a “green light” from Trump to strike Iran again if it appears to be advancing its nuclear program. 

He added that Israel would not have needed US permission to target Khamenei directly. 

That same day, Israeli Prime Minister Benjamin Netanyahu claimed victory and framed the conflict as a strategic opportunity to expand diplomatic ties with Arab states. 

“We have fought with determination against Iran and achieved a great victory. This victory opens the path to dramatically enlarge the peace accords,” Netanyahu said in a video address, referencing the Abraham Accords, which normalized relations between Israel and several Arab countries in 2020. 

However, Gulf states have condemned both Iran’s missile strike on Qatar and Israel’s attacks on Iranian facilities, citing concerns over regional stability and national sovereignty. 

In a joint statement on June 16, Arab countries rejected and condemned Israel’s military aggression against Iran, calling instead for a return to negotiations. 

Seadat insisted that Iran’s nuclear program remains peaceful and said Iran’s parliament moved to limit cooperation with the International Atomic Energy Agency (IAEA) only after repeated, ignored reassurances from Tehran. 

“Up to the moment our sites were attacked in contravention of the NPT rules, the IAEA Statute, and two resolutions by its General Conference that prohibit any attack on IAEA-safeguarded peaceful nuclear sites, 130 IAEA inspectors were in place, meaning one-fifth of all inspections conducted by the IAEA in the world,” Seadat said. 

He added: “Regardless of disagreements, the IAEA continued its most robust verification regime in the world in Iran.” 

Even after the attacks, Seadat said, both the IAEA and US intelligence confirmed there were no signs of nuclear weapons activity — despite early claims, which he attributed to a “very irresponsible” IAEA report. 

He said the 2015 nuclear agreement created “a balance: a cap on our peaceful nuclear program in return for full removal of sanctions.” That arrangement, he added, was especially reassuring as it was backed by UN Security Council Resolution 2231.

“This is a model that Japan and some others have. They also enrich uranium for peaceful purposes. I do not know what to say, unless the meaning of reassuring has changed, perhaps because of the aggressions by the Israeli regime and the Americans on Iran,” Seadat said. 

Tensions had started escalating after a May 31 IAEA report revealed that Iran had increased uranium enrichment to 60 percent — the only non-nuclear weapons state to do so — and expanded its stockpile of near-weapons-grade material by 50 percent in three months. Iran dismissed the report as “politically motivated” and “baseless accusations.” 

On Wednesday, Rafael Grossi, IAEA director general, said his top priority is resuming inspections in Iran to determine the impact of the recent strikes. The extent of any damage remains unclear. 

While Grossi suggested Iran may have relocated parts of its stockpile ahead of the attacks, US Defense Secretary Pete Hegseth said on Thursday he had seen no intelligence supporting that claim. 

Looking ahead, Seadat noted that Japan could play a significant diplomatic role, referencing its unique moral standing as the only country to have experienced atomic bombings. 

“The Hibakusha, the first generation of survivors of Hiroshima and Nagasaki, still walk among us in Japan,” he said. “Because of this, Japan possesses a profound moral authority, having known the depths of suffering like few others.” 

He added that Japan is well-positioned to support peace through “inclusive” regional development, particularly efforts that enhance energy security for all. 

Seadat also said there is growing alignment between Iran and Arab and Islamic states, which he described as a “positive and constructive path” toward regional peace. 

However, he cautioned that maintaining momentum would require active, sustained support from all sides. 

Although East Asia lies far from Iran, Seadat emphasized cultural similarities and the potential for cooperation — especially through Japan’s technological expertise and diplomatic engagement. 

“We need this new paradigm in our region, and I believe Japan, through the dynamism of its diplomacy, can contribute to it,” he said.