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posted by martyb on Sunday July 14 2019, @03:09AM   Printer-friendly
from the You-pay-me-to-hold-your-money? dept.

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.

https://www.bloomberg.com/news/articles/2019-07-13/the-black-hole-engulfing-the-world-s-bond-markets-quicktake?srnd=premium


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  • (Score: 2) by krishnoid on Sunday July 14 2019, @05:28AM (1 child)

    by krishnoid (1156) on Sunday July 14 2019, @05:28AM (#866808)

    If investing in a sure thing is bad, wouldn't it encourage the little people to actually spend that money, or give it to people who will? Rather than park it in an investment bank where it gets aggregated into a financial market and just moves around rather than actually being put to work doing things?

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  • (Score: 2, Informative) by Anonymous Coward on Sunday July 14 2019, @06:19AM

    by Anonymous Coward on Sunday July 14 2019, @06:19AM (#866814)

    It is a very bad sign. Most everyday people don't invest in bonds of this type on a large scale. Basically, these are mostly for the class of large accounts that cannot have a standard savings account or hide money under mattresses; they have to invest in something. At the same time, bond rates are adjusted according to supply and demand. Together, this shows that there is a huge chunk of professional and big-money investors that would rather take the 100% guaranteed loss of these bonds over the risk of alternative investments (REITs, real estate, stocks, private equity, commodities, futures, etc.).