A recent analysis from Pimco portfolio manager Jerome M. Schneider highlights the potential risk of the United States entering a negative interest rate environment.

Schneider points out that the risk is materializing due to the expiration of unlimited Federal Deposit Insurance Corporation (FDIC) insurance on demand deposits, which is set to expire on Dec. 31.

He notes that when the European Central Bank (ECB) recently cut its deposit rate on excess reserves to 0%, it led to this scenario. "Symptoms include euro money market funds halting inflows and in some cases liquidating completely, repurchase agreements and T-bills trading at negative yields, and European banks turning away clients' interest in CDs at any level," Schneider wrote, adding, "For European cash investors, the prospect of negative yields, or effectively, paying for safekeeping of your monies, is a very real consequence of the ECB decision."