Paying the government to borrow money? For many investors, it’s becoming a frighteningly common phenomenon.
Nick Hayes, a fund manager at Axa Investment Managers, is one who is having doubts about what is going on. For a long time he had resisted calling the surge in bond prices and corresponding plunge in yields an exaggeration.
But now, with governments worldwide offering more than $2 trillion (€1.8 trillion) worth of bonds to investors at negative interest – meaning investors have to pay for the privilege to lend their money – and about 80 percent of that from the 19-nation euro currency zone, it’s all become a bit too much for Mr. Hayes.
“The calm with which investors are accepting negative yields is concerning,” Mr. Hayes told Handelsblatt.
He’s far from the only one. According to a recent survey from Bank of America/Merrill Lynch, 84 percent of 180 fund managers believe the global bond market is currently overvalued.
Such pessimism is hardly surprising. Yields on bonds can only be found if you look with a magnifying glass these days. This is true above all for Europe, and especially so for Germany, its largest economy.
It’s a development that has the German government, which is saving hundreds of billions of euros in lower interest payments, jumping for joy.