When Spanish bonds traded at yields above 7% last Summer, the world's central banks went into a whirlwind to proclaim that these levels did not represent reality (in spite of the depression-era style economic data the nation was spewing). Fast forward nine months, the data is worse and getting worserer but yields - through the guiding hand of Draghi, the self-referential buying of domestic banks, and the BoJ's risk-is-no-object reach for anything non-JPY denominated - have crushed to 4.3% pre-crisis levels. Meanwhile, a few thousand miles south, the nation of Rwanda is issuing its first international debt today at a 7% yield (to the Japanese we are sure) as over 90% of the world's sovereign bond markets are at or near all-time low yields.
Rwanda Said to Cap Bond at $400 Million, Guidance at ‘Low’ 7%
as over 90% of the world's sovereign bond yields are at or near all-time lows... The last column shows the change in yield from the 03/06/09 US equity lows...
So who is buying all this 'stuff' - well it's not the 'smart money' - via WSJ,
Pacific Investment Management Co., home to the world’s biggest bond fund, is cutting holdings of Italian and Spanish government bonds amid a sharp rally in the two markets this month.
The money management firm has “lightened up” in the past couple of weeks in the European debt as part of a broad reduction in exposure to riskier assets in the fixed income markets...
...the recent rally in prices of Italian and Spanish debt, which recently sent yields on 10-year debt to their lowest levels since 2010, was driven by liquidity from major central banks, which has overshadowed the euro zone’s economic and fiscal problems for the moment. Yields on bonds fall when prices rise.
“This central bank-inspired rally has made the markets more expensive,” said Balls. “Yields could go lower still in Spain and Italy but we have sold into the rally because we remain worried over the fundamentals in the euro zone.”
and Blackrock too... (via WSJ),
"We have been less enthusiastic about euro-zone sovereign debt compared to three to six months ago," said Rick Rieder, chief investment officer of fundamental fixed income and co-head of Americas fixed income at BlackRock. "If growth continues to deteriorate in the euro zone, due in large measure to weak private-sector lending from a deleveraging banking sector, we would further reduce our positions in the euro zone, such as in Italy and Spain."