Dr. Constantin Gurdgiev:

Negative point 18%. That is the negative rate. The ECB is charging the banks to put the deposits with the ECB. The reason they are doing it is with exactly the same logic. The reason it is not working so far is because the bank has a choice between having a safe asset of a deposit with the ECB versus a safe asset of the German bonds. The returns on German bonds are more negative than the ECB deposit rates. Therefore, from the bank's point of view, if I have to put some money into the risk-free asset, I chose the lowest negative deposit rate possible in absolute value so that I minimise my losses and that is in the ECB.

In a way the ECB would have to go much more dramatically under-carded. When it is under-carded, in effect, it introduces a distortion into all the safe assets markets. There is no guarantee that the bond will not rise in price even more and the yields on bonds drop even more. In other words, it is like chasing one's own tail in the relationship-----