Negative Interest Rate Bonds: Implications for International Trade

This article discusses the implications of negative interest rate bonds on international trade and provides recommendations for companies to navigate the market. It also suggests that companies should refrain from saving money in the bank and instead focus on increasing expenditures and exporting their products.

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Logistics
International business has become a challenging venture. The nature of the market has
made it quite hard for businesses to efficiently operate in the international arena. That happens
because of the numerous social, economic, environmental, technological, legal, and political
forces that directly and indirectly influence the operation of businesses. One of the major
economic factors in the international market is the regulation of the governments. The
government regulates businesses by taking a number of measures such as the manipulation of the
interest rates.
If the economy is trading on negative bonds, the corporates can be seriously affected.
That happens because in a situation where the government sells its bonds at negative interest
rates, the corporates might be disadvantaged. This is likely to happen since the levying of
negative interests on the bonds means that it might be costly to save money. Instead of getting a
profit on the savings, it is the client who instead pays for the safe keeping of the money (Bech
and Aytek 21). As an International Trade Consultant, I strongly believe that the existence of the
negative interest rate bonds can be harmful to the companies. In this regard, for my client to
safely navigate and maneuver through this market, it should adopt the following
recommendations:

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First and foremost, the company should refrain from saving money in the bank. At the
same time, the buying of the bonds should be done at minimal, if necessary. Saving should be
discouraged at this time because it increases the costs of operations. Since there are no interests
accrued from the savings, it not fruitful to save much because it will instead bring additional
costs to the company (Arteta, et al. 62). At the same time, the negative interest bonds should not
be purchased because they guarantee no returns to the company. I support this recommendation
because it can help in strengthening the company and making it stable at this time when
economy is quite volatile.
Secondly, the company should increase its expenditures and concentrate on the
exportation of its products. Since no savings are recommended, the company should use its
resources to put up additional investments. It is the right time to expand the business and make it
grow as much as possible (Di Giorgio and Guido 81). The additional resources can be acquired
through borrowing from the local financial institutions. I suggest that the management should
take advantage of the situation and borrow more than it saves. The low interest rates are
favorable for borrowing by such an established company (Neal, et al. 33). Money borrowed at
negative or extremely low interest rates can be much valuable to the company. It is not costly
because it does not involve additional costs.
In conclusion, the existence of negative interest rate bonds in the market creates lots of
changes to the businesses. Despite the availability and low costs of credit facilities, businesses
might find it extremely challenging to navigate the market. In this regard, I recommend that the
company should consider lowering its savings and bond acquisitions. It might be uneconomical
to do so. Rather, the management should consider taking credit facilities because they are

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cheaply available. All these interventions can enable the company to exploit the situation
however volatile it might be.

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Works Cited
Arteta, Carlos, et al. Negative interest rate policies: Sources and implications. Washington DC:
The World Bank, 2016.
Bech, Morten L., and Aytek Malkhozov. "How have central banks implemented negative policy
rates?." BIS Quarterly Review March (2016).
Di Giorgio, Giorgio, and Guido Traficante. "Fiscal shocks and helicopter money in open
economy." Economic Modelling 74 (2018): 77-87.
Neal, Robert, et al. "Interest rates and credit spread dynamics." The Journal of Derivatives 23.1
(2015): 25-39.