Sovereign bond yields have fallen sharply over the past five years, with the median 10-year yield falling to 1.17% on July 15, down from 3.87% in 2011, Fitch Ratings said on Wednesday.
Among the top investment-grade issuers, Spain and Italy reported the largest declines on a weighted-average basis over the past five years (down 422 and 413 basis points, respectively, from 2011), and the U.S. reported the smallest decline (down 28 basis points).
Falling yields over the past five years have cost global investors more than $500 billion in annual income on currently $38 trillion in outstanding bonds, Fitch said.
“Cash flow benefits have effectively been transferred from global investors to sovereign issuers, as sovereign borrowing costs have dropped in response to central bank monetary stimulus,” said Fitch in a news release on the data. “This has posed new challenges for income-reliant investors, such as insurers and pension funds, while enabling governments to borrow at increasingly attractive rates.”
The ratings agency added: “Persistence of ultra-low sovereign borrowing costs could eventually lead to higher government debt levels and increasing leverage, particularly if global growth remains sluggish and doubts over the efficacy of monetary stimulus grow.”