There's a new career option in Denmark. It's one that sounds too good to be true: getting paid to borrow money to buy homes.



As mortgage-bond refinancing auctions came to a close in Denmark, it was clear that homeowners in the country were about to get negative interest rates on their loans for all maturities through to five years, representing multiple all-time lows for borrowing costs.

For one-year adjustable-rate mortgage bonds, Nykredit’s refinancing auctions resulted in a negative rate of 0.23%. The three-year rate was minus 0.28%, while the five-year rate was minus 0.04%.

...

In AAA-rated Denmark’s government bond market, yields are negative right through to the 10-year segment.

The negative rates have so far done little to revive inflation in Denmark, which has hovered around 1% for well over a year.



Until now negative yield bonds have been limited to the safest types of bonds, like governments and major corporations.

Denmark is hardly alone. They have just had NIRP the longest and deepest.

The German 10-year Bund yields touched a record low of -0.219%.



Imagine willingly loaning someone a lot of money, and after 10 years getting only 98% of it back (minus inflation).

Or how about this, investing in risky, nearly insolvent companies and getting practically no yield.



Japan’s negative interest rates have upended many conventions in the local credit market and another was broken on Friday when the nation’s first publicly offered junk bond priced -- at the super-low interest rate of 0.99%.

Aiful Corp., a consumer lender that teetered on the edge of bankruptcy a decade ago, sold 15 billion yen ($138 million) of speculative-grade notes due in 1.5 years.

How did this happen?

Look no further than the central banks.



The BOJ has likely also become the top shareholder in 23 companies, including Nidec, Fanuc and Omron, through its ETF holdings. It was among the top 10 for 49.7% of all Tokyo-listed enterprises at the end of March.

At this point you've probably figured out that this is insane, and you are wondering what they hope to accomplish. Bloomberg has mostly accurate explanation, even if it describes a batshit crazy solution in ho-hum terms.



Growth and inflation are weak. Devaluation is difficult if every nation tries to reduce the value of its currency at the same time. Debt defaults on the scale required would destroy a large portion of the world’s savings, not to mention affect the solvency of the financial system, triggering a collapse of economic activity. That’s why policymakers resist write-downs of trillions of dollars’ worth of debt that cannot be paid back. So, central banks must instead covertly use negative rates to reduce excessive debt levels by transferring wealth from savers to borrowers through the slow confiscation of capital. What negative rates are telling us is that the global economic system cannot generate sufficient income to service, let alone repay, current debt levels. The latter are so high that even current, artificially depressed rates only allow them to be barely managed.



The fact remains that someone has to pay the price of the financial excesses of the last few decades. With low and negative rates, that “someone” will be savers.

It's as if this is the right thing to do and that there won't be serious consequences.

We'll just steal from savers. No biggie.