Which currency offers Highest rate of interest in the developed world?
Which currency offers Highest rate of interest in the developing (emerging) countries?
Answer:
Would it be better to say: in what denomination are risk-free securities offered at the highest interest rate?
Interest rates vary substantially within a nation - the lowest being risk-free rates (ie, US T-Bills), the highest being "Junk" status corporate bonds (ie, Delco bonds). For the ease of comparison, I'll just use the comparable risk-free rates (or lowest-risk rate). Also, I'll use the coupon rate rather than the yield-to-maturity, since the coupon rate does not change, while the YTM changes as prevailing market interest rates fluctuate.
Australia's 2-year note has a coupon of 7.5%, which is also high; most other developed nations have a short-term coupon rate of around 4.7% to 5%. The lowest rates are found in Japan, whose Yen is only recently emerged from dampening deflation.
As far as developing nations goes, bond information is sketchy - many developing nations lack the credibility to borrow in such a manner and so their bond issues would not be successful in raising funds.
Brazil's 2-year note has a coupon rate of 14.5%, which is among the highest in the world for a "risk-free" bond. I am loathe to consider Brazil developing, but this is probably accurate for the present purpose.
Zambia's 5-year government bond has a 13% coupon.
Zimbabwe is something altogether different - 600% overnight lending rates from the central reserve! A 91-day T-bill is 66%. Note that this includes a heavy inflation premium; money depreciates quickly so that a high interest rate is needed to compensate the lender (bond purchaser).
In Thailand, a 24-month CD earns about 2.5% interest, while the yield on comparable-length government securities is around 3.1%.
Note that there is not perfect parity between interest rates, partly due to exchange rate issues (ie, if US currency is expected to lose value against Thai currency, then it makes sense that US-denominated interest rates would be higher than Thai-denominated interest rates), and partly due to particular issues of fiscal and monetary policy.
It's important to understand that currencies *do not* offer interest!! Last time I checked, the $20 in my wallet does spontaneously grow from one day to the next.
Interest earnings come from securities investments (i.e. loans), whose returns depend on a number of factors from time to maturity, liquidity, and risk.
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