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