Bonds must have yields above the effective lower bound because:

Question

Quizplus · Accepted Answer

People can always choose to hold cash instead of investing in a bond with a negative yield. This creates a natural lower bound on bond yields. Additionally, while the US treasury does not guarantee a positive yield on bonds, it is generally assumed that investors require a positive return on their investments, particularly over the longer term. Banking technology is not a factor in setting the lower bound on bond yields.

Bonds Must Have Yields Above the Effective Lower Bound Because