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There's a multitrillion-dollar black hole growing at the heart of the world's financial markets. Negative-yielding debt -- bonds worth less, not more, if held to maturity -- is spreading to more corners of the bond universe, destroying potential returns for investors and turning the system as we know it on its head. Now that it looks like sub-zero bonds are here to stay, there's even more hand-wringing about the effects for mom-and-pop savers, pensioners, investors, buyout firms and governments.
[...] Negative-yielding debt topped $13 trillion in June, having doubled since December, and now makes up around 25% of global debt. In Germany, 85% of the government bond market is under water. That means investors effectively pay the German government 0.2% for the privilege of buying its benchmark bonds; the government keeps 2 euros for every 1,000 euros borrowed over a period of 10 years. The U.S. is one of the few outliers, with none of its $16 trillion debt pile yielding less than zero, but across the world, strategists are warning that the problem may get worse.
(Score: 0) by Anonymous Coward on Sunday July 14 2019, @04:02AM (3 children)
It's called "deflation." The market expects things will go from bad to worse.
(Score: 0) by Anonymous Coward on Sunday July 14 2019, @04:17AM
As soon as the stock markets come to their senses and correct to something a little closer to actual value, bonds will be in demand again.
(Score: 1, Insightful) by Anonymous Coward on Sunday July 14 2019, @04:41AM (1 child)
Call it whatever you like, it's something that the world hasn't see yet at this scale.
(Score: 0) by Anonymous Coward on Monday July 15 2019, @05:01AM
We've seen it before - the Japanese savers holding onto national debt starting from the90s. Two so-called "lost decades" of Japanese economy,