Skip to main content
MENU
Subscribe
  • Login
  • My Account
  • Logout
  • Register For Free
  • Subscribe
  • Topics
    • Alternatives
    • Artificial Intelligence
    • CIOs
    • Consultants
    • Defined Contribution
    • ESG
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Partner Content
    • Private Credit
    • Pension Funds
    • Private Equity
    • Real Estate
    • Regulation
    • Special Reports
    • Washington
    • White Papers
  • International
    • U.K.
    • Canada
    • Europe
    • Asia
    • Australia - New Zealand
    • Middle East
    • Latin America
    • Africa
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Influential Women in Institutional Investing 2024
    • Eddy Awards
  • Resource Guides
    • Active Thematic Global Equities
    • Retirement Income
    • Fixed Income
    • Pension Risk Transfer
    • Pooled Employer Plans (PEPs)
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • ESG Investing | Industry Brief
    • Innovation in ESG Investing
    • ESG Rated ETFs
    • Divestment Database
  • Defined Contribution
    • Latest DC News
    • The Plan Sponsor's Guide to Retirement Income
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • DC Plan Design: Improving Participant Outcomes
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Research Center
    • The P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
  • Print
Breadcrumb
  1. Home
  2. MARKETS
January 27, 2020 03:09 PM

World's pile of negative debt surges by the most since 2016

Bloomberg
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Bloomberg
    Tourists wearing surgical masks in Macau, China. Investors worldwide have ditched riskier assets and piled into bonds amid mounting fears over a deadly virus spreading from China.

    The global rush for safer assets has fueled a huge jump in the world's stockpile of negative-yielding bonds, snapping months of decline in the value of subzero debt.

    The pool of securities with a yield below zero surged by $1.16 trillion last week, the largest weekly increase since at least 2016 when Bloomberg began tracking the data daily. Another injection looked certain Monday, as investors worldwide ditched riskier assets and piled into bonds amid mounting fears over a deadly virus spreading from China.

    "I would not go short in the global rates markets now," said Ian Lyngen, the head of U.S. rates strategy at BMO Capital Markets. "The health scare needs to run its course and going with the trade makes the most sense to me."

    It all threatens to reignite a debate about the phenomenon of bonds guaranteed to post losses for buy-and-hold investors. While the total fluctuated day-by-day, it shrank for four straight months through December on signs a slowdown in global growth may be bottoming out and that central banks may pause their easing cycle.

    That means no immediate relief for markets that had started to feel the burden of negative yields lift. Last week brought the addition since mid-January to about $1.5 trillion and the pile overall to $12.4 trillion — the highest level in two months.

    The resurgence is a potent reminder that the market distortions synonymous with loose monetary policies have not gone away. Their impact and effectiveness was one of the key topics at a gathering of world and business leaders in Davos last week. Among the voices, Cantor Fitzgerald President Anshu Jain said repercussions for insurers and pension funds "will be felt for years to come." U.S. President Donald Trump wanted to know who was buying it all.

    Even with the hand-wringing at Davos and growing sub-zero stockpile, policy makers setting ultra-low rates have assured markets the easy money will keep flowing. European Central Bank President Christine Lagarde said last week policy must remain "highly accommodative" with inflation struggling to stay much above 1%, though she did reiterate the bank will keep looking at the impact of negative rates.

    The risk-off mood sparked by the new coronavirus and worries about its impact on companies and growth may yet prove temporary. The total of negative-yielding debt remains well below its high of more than $17 trillion in August, and many analysts expect it to stay that way.

    "The peak of negative yields is behind us for now, for sure," said Luke Hickmore, a money manager at Aberdeen Standard Investments. "We have a new ECB president, a German government who may well get round to fiscal spending in a new Europe and we may even see a bit of inflation."

    Confidence that negative yields were loosening their grip had been rising recently, in particular for German bunds. Banks such as Citigroup Inc. and NatWest Markets recommended investors brace for a further sell-off in Europe's safest debt and dealers were touting options offering maximum profits should 10-year German yields hit zero. TD Securities said Jan. 24 it was maintaining a bearish bias to bunds even though there may be jitters about the coronavirus in the near-term.

    Signs of life in long-moribund inflation trades also suggested yields should head higher. This month's Bank of America Corp. survey of investors found the proportion of those seeing an upswing in consumer-price growth around the world over the next year rose to 56%, an increase of 14 percentage points from last month and the highest level since November 2018.

    "Without the virus and without the geopolitical tensions sure, rates would be higher," said Mr. Lyngen at BMO. "Alas, that is not the reality of global financial markets at the moment."

    Instead, bonds with below-zero yields continue to make investors money because prices keep rising amid huge inflows into fixed-income funds, enduring demand from pension funds to central banks and now the safe-haven trade.

    "With many clearly concerned about elevated risk asset valuations and the China coronavirus also providing a new dimension, the risk of being 'caught short' bonds at the end of the fiscal year might soon start to factor more heavily into investment decisions," Morgan Stanley strategists wrote in a Jan. 24 report.

    Related Articles
    Pension funds reel from ‘financial vandalism’ of falling yields
    Negative yields prompt institutional investors to buy up risky loans
    Negative yields: the new reality
    Recommended for You
    Ray Dalio
    Ray Dalio urges Trump to reconsider China tariffs, cut deal to strengthen yuan vs. dollar
    Bills of euro, dollar and pound currencies, among others
    Trump's tariffs fail to derail rotation out of U.S. equities to European stocks
    Skyline of Riyadh, Saudi Arabia.
    Middle East's ambitious growth plans, sovereign wealth funds put capital markets on the map
    Sponsored
    White Papers
    The State of Lifetime Income Report
    The Next Wave of LDI Evolution
    Retirement security to future income wins, TIAA brings you the latest financial…
    U.S. Public Funds Top Performers: Q2 2024
    Generative AI Investing: Opportunities at a Key Tech Inflection Point
    Research for Institutional Money Management: Advancing Physical Risk Modelling,…
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    October 23, 2023 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Custom Content
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2025. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Artificial Intelligence
      • CIOs
      • Consultants
      • Defined Contribution
      • ESG
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Partner Content
      • Private Credit
      • Pension Funds
      • Private Equity
      • Real Estate
      • Regulation
      • Special Reports
      • Washington
      • White Papers
    • International
      • U.K.
      • Canada
      • Europe
      • Asia
      • Australia - New Zealand
      • Middle East
      • Latin America
      • Africa
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Influential Women in Institutional Investing 2024
      • Eddy Awards
    • Resource Guides
      • Active Thematic Global Equities
      • Retirement Income
      • Fixed Income
      • Pension Risk Transfer
      • Pooled Employer Plans (PEPs)
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • ESG Investing | Industry Brief
      • Innovation in ESG Investing
      • ESG Rated ETFs
      • Divestment Database
    • Defined Contribution
      • Latest DC News
      • The Plan Sponsor's Guide to Retirement Income
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • DC Plan Design: Improving Participant Outcomes
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Research Center
      • The P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
    • Print