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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: 0) by Anonymous Coward on Sunday July 14 2019, @03:59PM (1 child)

    by Anonymous Coward on Sunday July 14 2019, @03:59PM (#866923)

    makes sense.
    if there's deflation, don't borrow money =profit.
    if there's inflation, borrow money =profit.

    also, deflation is a bit of a unicorn, e.g. doesn't really exist in the real world.
    it sounds "bad" but if you get less wages and stuff becomes cheaper at the same time the absolute result would be paradise: you get no money for your labour but everythings free, lol.
    inflation on the other hand can continue until infinity: you earn one gazillion dollar per hour but a loaf of bread costs half a gazillion dollars...
    mind you, i am just a armchair economist, if even. i think any sane person would just try and find a "eigen value" of money, a number that reflects your real wage and cost of living independant of de- and inflation.
    but i guess this "real number" is a big secrit and cannot be revealed to the public in general?

    also negative bonds? srsly? that's like the clubermint admitting they're NOT doing anything productive with the money they're borrowing from you? woooaaahhh! that's like shooting a demonstrator and the demonstrator begs for more?

  • (Score: 2) by hendrikboom on Monday July 15 2019, @01:06PM

    by hendrikboom (1125) Subscriber Badge on Monday July 15 2019, @01:06PM (#867164) Homepage Journal

    absolute result would be paradise: you get no money for your labour but everythings free, lol.
    inflation on the other hand can continue until infinity

    Clearly you need to use a logarithmic scale.