What low and negative interest rate policies mean for the middle market
Distinct risks for banks, insurance firms and pension funds
THE REAL ECONOMY |
The long period of low interest rate policy in the United States and the implementation of negative interest rate policies (NIRP) in Europe and Japan are distorting capital allocation decisions. That distortion carries distinct risks for banks, insurance firms and pension funds. In particular, the risk to the business model of insurance firms from low yields means U.S. providers are at risk if the Fed sustains its lower-for-longer policy without an accompanying shift toward issuing longer-term Treasury debt.
MIDDLE MARKET INSIGHT: If the United States follows the lead of the European Central Bank and Bank of Japan during the next recession, middle market and small insurance firms should prepare for significant disruptions in their ability to sustain their lines of business.
Read the full article in this month's issue of The Real Economy.