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Bloomberg
Negative yields are
spreading to more areas of the fixed-income market by the day.
Data from Barclays Plc highlight the staggering pace of change as this week Deutsche Bahn AG became the first non-financial company to sell negative-yielding bonds, and the German government auctioned 10-year debt with a sub-zero yield for the first time.
To get a sense of the downward momentum, look at Barclays’ global aggregate index which tracks US$47.3 trillion of investment-grade debt sold in 24 different currencies, and includes everything from sovereign bonds to mortgage-backed securities. More than a quarter of that yields less than zero, with more than half yielding under 1 percent, according to data compiled by the London-based bank.
The pile of these bonds is growing as central banks around the developed world step up policies to bolster growth. While it’s been possible to lend to some governments at a loss since at least 2012, the phenomenon has gathered pace since the European Central Bank’s decision to cut its deposit rate below zero in 2014. It has got even larger in the past few weeks as the UK’s vote to leave the European Union and concerns about Italy’s banking system accelerated a global rush for the safest assets, and the ECB started buying company debt as part of its asset-purchase programme. Investors who buy negative-yielding bonds now and hold until maturity will receive less money than they paid.
That’s a palatable prospect for those seeking safety in volatile markets. For others, sub-zero bonds have unleashed a global hunt for yield that’s boosted demand for stocks and other riskier assets.