Bloomberg’s Index Tracks Record $18 Trillion in Negative Yielding Debt, Massive Growth Since 2014

Posted on 12/13/2020

Bloomberg Barclays Global Negative Yielding Debt Index tracks negative yielding debt and the index is not an investable product. Last week, the market value of the Bloomberg Barclays Global Negative Yielding Debt Index spiked to US$ 18.04 trillion. This is the highest level ever recorded. To keep things into perspective, the index passed the US$ 2 trillion mark in 2014, and reached up to US$ 12 trillion in 2016, only to fall down around US$ 8 trillion in 2017. By the middle of 2018, the Negative Yielding Debt Index breached US$ 10 trillion, shooting upward in its current path.

Germany Government Bonds (BUND) YIELD  France Government Bonds YIELD  Italy Government Bonds YIELD 
GER 1-YR -0.732 FRA 1-YR -0.664 ITA 2-YR -0.452
GER 2-YR -0.766 FRA 2-YR -0.753 ITA 3-YR -0.417
GER 3-YR -0.821 FRA 3-YR -0.76 ITA 4-YR -0.239
GER 4-YR -0.825 FRA 4-YR -0.724 ITA 5-YR -0.114
GER 5-YR -0.803 FRA 5-YR -0.691 ITA 6-YR 0.026
GER 6-YR -0.807 FRA 6-YR -0.633 ITA 7-YR 0.138
GER 7-YR -0.741 FRA 7-YR -0.602 ITA 8-YR 0.319
GER 8-YR -0.734 FRA 8-YR -0.524 ITA 9-YR 0.384
GER 9-YR -0.681 FRA 9-YR -0.446 ITA 10-YR 0.522
BUND 10-YR -0.627 FRA 10-YR -0.376 ITA 15-YR 0.881
GER 20-YR -0.431 FRA 15-YR -0.215 ITA 30-YR 1.427
GER 30-YR -0.234 FRA 20-YR 0.042    
    FRA 30-YR 0.313  

Taken on December 13, 2020 – 8:00 AM PST

The COVID-19 lockdowns have exacerbated the growth of sub-zero sovereign debt. Spain’s 10-year bonds were the latest to join the negative sovereign debt group, with rates falling below 0% for the first time. Portuguese 10-year bond yields also dropped below 0% this week. Roughly US$ 1 trillion of bonds have seen their yields turn negative this week. Bloomberg’s calculations show that 27% of the world’s investment-grade debt is now below-zero. This means buyers of these bonds are willing to pay a high enough price for the debt that they are guaranteed to make loss if they hold it to maturity. The low, zero and below-zero interest rates, Western governments have been able to raise large amounts of debt essentially for free. Central banks have been buying up the sovereign debt faster than governments can throw at them.

Institutional investors are being forced to take on more risk in fixed income and they are doing so. The central banks are doing a lot of the buying, thus rapidly increasing the size of their respective balance sheets. Why would anyone want to buy a bond with a negative yield?

U.S. Treasury yields remain some of the few developed market bonds still holding above 0%. Chinese government bonds are higher yields vs. European government bonds.

U.S. Treasurys Yield U.K. Government Bonds (GILT) Yield Japan Government Bonds YIELD 
US 1-MO 0.076 UK 3-MO -0.054 JPN 3-MO -0.084
US 3-MO 0.076 UK 6-MO -0.125 JPN 2-YR -0.146
US 6-MO 0.084 UK 1-YR -0.039 JPN 3-YR -0.144
US 1-YR 0.089 UK 2-YR -0.114 JPN 5-YR -0.13
US 2-YR 0.121 UK 3-YR -0.118 JPN 10-YR 0.009
US 3-YR 0.177 UK 4-YR -0.108 JPN 15-YR 0.216
US 5-YR 0.364 UK 5-YR -0.095 JPN 20-YR 0.371
US 7-YR 0.627 UK 6-YR -0.069 JPN 30-YR 0.609
US 10-YR 0.896 UK 7-YR -0.001    
US 20-YR 1.419 UK 8-YR 0.04    
US 30-YR 1.628 UK 9-YR 0.128    
    UK 10-YR 0.175    
    UK 15-YR 0.393    
    UK 20-YR 0.665    
    UK 30-YR 0.712  

Taken on December 13, 2020 – 8:00 AM PST

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