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