Deutsche offers four reasons why negative......>

STIR: Deutsche offers four reasons why negative rate pricing may persist:

- 1) Fed hikes very unlikely for foreseeable future: "market participants

believe that negative rates are significantly more likely, or alternatively

driven by a truncation of the upper end of the distribution if the size and

likelihood of future rate increases declines"

- 2) Negative term premia: Cites Fed research that funds rate term premium

estimates may be non-linear and significantly negative over the medium term.

- 3) Sub-zero rates seen possible: Fed's survey of primary dealers shows some

belief that lower bound is negative, market possibly pricing Fed following

similar path to other central banks that couldn't meet policy objectives

- 4) (Similar to 3) The Fed may need to provide more accommodation: whether an

approach of outcome-based forward guidance, yield curve control and traditional

QE (all of which Deutsche expects) will be sufficient in this crisis "remains an

open question", particularly if QE does not have as much "bang for the buck" as

it did in the past - meaning "reduced policy space is likely to leave market

participants anticipating the possibility of negative rates down the road."