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Lower-for-longer Interest Rates
An increasing share of assets globally is yielding low or negative interest rates as monetary policy eases. Demographic trends and low productivity gains in many countries increase the likelihood of a long-lasting period of weak demand & low rates.
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  • SUMMARY
  • REPORTS
    • OUTLOOKS
    Banking System Outlook - Germany: Slowing economy and rising profitability challenges drive our negative outlook
    21 Nov 2019|Moody's Investors Service
    The profitability and overall creditworthiness of banks in Germany will weaken over the next 12 to 18 months as ultra-low interest rates continue to exacerbate difficult operating conditions in the system. Commercial banks and deposit-funded institutions, in particular, will struggle to out-earn their costs even with loan loss provisions at unsustainable lows.
    OUTLOOK
    Life Insurance – US: 2020 outlook stable on steady economy, lower interest rates weaken performance
    Moody's Investors Service
    We maintain a stable outlook on the US life insurance industry as strong capital levels, a focus on adapting products to a low interest rate environment, and investment in technology counterbalance the headwinds of lower interest rates and heightened risks to the US economy. 
    SECTOR IN-DEPTH
    Fresh fall in rates adds to pressure on life insurers’ profitability and economic solvency
    19 Nov 2019|Moody's Investors Service
    Low rates are once again the key risk facing insurers globally, after bond yields fell again during 2019 from already subdued levels. With a low for longer scenario now more likely, life insurers, facing added pressure on their investment income and economic solvency, will be forced to accelerate their shift to a less interest rate-sensitive business model.
    SECTOR COMMENT
    Banks – Europe: ECB's introduction of deposit tiering system will mitigate effect of low interest rates on EU banks’ margins
    13 Sep 2019|Moody's Investors Service
    The introduction of the tiering system on banks’ excess liquidity placed at the central bank is credit positive because it will reduce the cost of holding liquidity at the ECB, providing a partial offset. We expect that the tiering mechanism will be particularly positive for banks with material excess liquidity.
    SECTOR IN-DEPTH
    Financial Institutions – US: Continued low interest rates will alter firms' behavior, encourage more risk-taking
    12 Sep 2019|Moody's Investors Service
    The past decade of low interest rates and the expectation that the low rate environment will continue for some time will have a large impact on the financial strategies of US bank and non-bank financial institutions and will encourage more risk-taking.
    SECTOR IN-DEPTH
    Real Estate – Europe: Low rates ease credit quality pressure despite slowing economy, yield concerns
    05 Sep 2019|Moody's Investors Service
    Despite slowing economic growth and very low property yields, continued low interest rates will prevent sector wide property value and credit quality declines in the next 12-18 months. Values will not fall uniformly across asset classes and countries as property yields widen, and low interest rates mean yields are unlikely to widen and values to decline substantially until 2020 or even 2021