There's no shortage of demand in the $100 trillion market for global debt, as investors crowd into corporate and long-term sovereign obligations to steer clear of negative yields.
Yield-hungry bidders are snapping up government bonds. Auctions of long-term debt by the U.S., Spain and Portugal all drew strong demand Wednesday, with the Treasury sale seeing unprecedented appetite from one class of investors. Buyers are also clamoring for company bonds, in a week that may be the busiest this year for corporate borrowing in the U.S. and Europe.
The driving force behind the bond binge is the growing universe of negative-yielding securities, which has expanded above $9 trillion since the European Central Bank and Bank of Japan cut interest rates below zero. J.P. Morgan Chase & Co. predicts that with the supply of debt falling, conditions in the global bond market will be so favorable in 2016 that record-low yields are probably in store.
“In a yield-starved world, where a significant percentage of global government debt is yielding zero or something less, investors are reaching for yield by extending maturities, buying credit, or some combination thereof,” said Colin Lundgren, head of fixed income in Minneapolis at Columbia Threadneedle Investments, which managed about $470 billion as of Dec. 31.