Negative rates

Bond Plague Goes Global

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Negative interest rates are already raining down on the Japanese central bank's plans.
  • Why it matters

    Why it matters

    Negative bond yields are becoming a global phenomenon that is putting banks and insurers under pressure and spells losses for savers and investors.

  • Facts

    Facts

    • The global volume of goverrnment bonds with negative yields has almost trebled since December to $6.6 trillion (€5.8 trillion).
    • The yields on 27 percent of the bonds listed in JP Morgan’s  Government Bond Index are negative.
    • Strategists said the yield on the 10-year German government bond, a benchmark for long-term bonds in the euro zone, may fall below zero.
  • Audio

    Audio

  • Pdf

If things continue as they are, positive interest rates will soon become extinct.

In the last four months, the global volume of government bonds with negative yields has almost trebled. The figures are breath-taking. At the end of December, the volume of bonds in negative territory amounted to “just” $2.4 trillion (€2.1 trillion). Since then it has ballooned to $6.6 trillion.

Welcome to the world of negative interest rates, where the laws of capitalism have been turned on their head. A year ago, negative rates were a phenomenon confined to northern Europe, Japan and Switzerland. But thanks to a mix of ultra-accommodative central bank policies, global fears of slowing growth and mounting risk-aversion among investors, the trend is spreading across the Western world.

The yields on 27 percent of the bonds listed in JP Morgan’s Government Bond Index are now negative. That means that people who lend these governments money and hold on to the bonds until they mature will make a loss.

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