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$20 Trillion In Government Bonds Yield Under 1%: The Stunning Facts How We Got There

Tyler Durden's picture




 

Last week we wrote that in the latest bout of European NIRP panic, "Over Half Of European 2-Year Bonds Trade At Record Negative Yields" with Italy now paid to issue debt, with a follow-up in which even very serious banks are now looking at the Eurozone's record €2.6 trillion in negative-yielding debt, and finding that the lower yields drop, the greater the savings rates across the continent...

... suggesting a "policy failure" as even more cash ends up inert on bank balance sheets instead of being spent on either the economy or asset price inflation.

And while the €2.6 trillion number noted above is massive, and as we showed last week is a record for the amount of debt trading under negative rates in Europe...

 

... here are some shocking statistics on how we got there, and which we all take for granted, courtesy of BofA:

  • There have been 606 global rate cuts since LEH
  • $12.4 trillion of central bank asset purchases (QE) since Bear Stearns
  • The Fed is operating a zero rate policy for the longest period ever (even exceeding the WW2 Aug’37-Sep’42 zero rate period)
  • European central banks operating negative rate policies (Swiss policy rate currently -0.75%; Sweden’s policy rate currently -0.35
  • Just this month, the PBoC cut rates, the ECB confirmed QE2, Sweden announced additional QE, and the BoJ promised additional easing if necessary "without hesitation"
  • $6.3 trillion global government bonds currently yielding <0%
  • $20.0 trillion global government bonds currently yielding <1%

But wait, there's more in describing what BofA says is the most immense and long-lasting monetary stimulus, i.e., bubble,  in history:

  • For every 1 job created in the US this decade, US corporations have spent $296,000 on stock buybacks
  • An investment of $100 in a portfolio of global stocks & bonds (60:40) since the onset of QE1 would now be worth $205; in contrast, a wage of $100 has risen to just $114 over the same period
  • US prime (“CBD”) office real estate has appreciated 168% this decade; in contrast, the value of US residential property across America has risen just 16% (see Chart 5)

  • For every $100 US venture capital & private equity funds raised Jan 1st 2010 they are now raising $275; in contrast, for every $100 of US mortgage credit extended and accepted at the beginning of this decade, just $61 was extended and accepted in June 2015 (see Chart 6 - a big reason the US consumer remains so moribund)

  • In 2014 London accounted for 26% of the value of all housing sales in England, despite accounting for just 1% of the land area

And so on.

What can end this wholesale lunacy which only economists fail to grasp for what it is: the biggest global asset bubble in the history of humanity, leading to a monetary ice age across the world's economies (as the velocity of money drops to zero or goes negative) which as Albert Edwards so aptly predicted years ago, is the natural counter to asset price hyperinflation? Alas, with all central banks now clearly all-in on the last and final attempt to reflate the world's $200+ trillion in debt (a default is not an option as it would wipe out tens of trillions in "legacy" equity wealth) expect many more exponential charts in the coming months before the inevitable admission of "policy failure" by central planners which, if past is prologue, will come during the sound of guns.

 

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Sun, 11/01/2015 - 16:39 | 6737687 Bill of Rights
Bill of Rights's picture

Whew thank god we're not talking about real money here...

Sun, 11/01/2015 - 18:49 | 6737978 Kaiser Sousa
Kaiser Sousa's picture

ah man...

Gold dont pay interest...

im so stupid for accumulating physical Gold and Silver...

and u cant eat them either....

Mon, 11/02/2015 - 01:51 | 6738841 Jafo
Jafo's picture

Most of that debt is short duration debt.  Would governments extend the duration when faced with a panic?  You might be looking for where your boat sank if they did.

Sun, 11/01/2015 - 19:39 | 6738083 doctor10
doctor10's picture

sounds like they're not worth a damn!!

Sun, 11/01/2015 - 16:40 | 6737690 TrueBull
TrueBull's picture

Oh maaan!

How do you even play this game anymore?

Sun, 11/01/2015 - 18:07 | 6737803 algol_dog
algol_dog's picture

Pretty much tells you the whole story here. Absolutely no reason to work in this country, other than at a trading desk. If the Fed wanted inflation they'd of raised rates long ago and personal incomes would of sky rocketed.

Sun, 11/01/2015 - 16:43 | 6737696 Took Red Pill
Took Red Pill's picture

" before the inevitable admission of "policy failure" by central planners."

They will never admit their failure! There will just be an excuse used to explain the failure, like war!

Sun, 11/01/2015 - 16:46 | 6737702 Sudden Debt
Sudden Debt's picture

Admission of policy... like that will ever happen.

I've been hearing from our politicians already so many times that money in savings accounts should be used BY THE GOVERNMENT to fund their projects as the money would yield more then on a savings account.

In short, they'll steal the money and tell us we'll get 2 or 3% per year in return.

And what about withdrawls?

They covered that also!

They will first take money that has been on savings account for over a decade and your money would be invested for a timespan of 5 to 10 to 15 years where you could sell.

You could also sell prematurely off course... for a small fee off course... say 20%?

Sun, 11/01/2015 - 16:51 | 6737718 divedivedive
divedivedive's picture

I'm assuming you mean the US - which is one reason why - even though the exchange rate hurts at the moment - we have moved one third of our savings out (where it is making > 3% before taxes).

Sun, 11/01/2015 - 16:51 | 6737720 viahj
viahj's picture

"I've been hearing from our politicians already so many times that money in savings accounts should be used BY THE GOVERNMENT to fund their projects as the money would yield more then on a savings account.

In short, they'll steal the money and tell us we'll get 2 or 3% per year in return."

 

we already have this service in the US, it's called Social Security. 

Sun, 11/01/2015 - 19:22 | 6738046 Sudden Debt
Sudden Debt's picture

Nononono, you haven't seen anything yet.

In Europe, a employer needs to pay 2,5 times what the employee actually takes home.

All the rest goes to the government to fund social security and the rest of the handouts.

In short, if your boss pays you 5000 dollars now, under a European system, you would take home 2000 dollars.

You think it's bad now in America?

Ha! Look to the countries where Obama found his inspiration!

You have no idea how much worse it will get for you guys.

 

Sun, 11/01/2015 - 16:46 | 6737704 divedivedive
divedivedive's picture

I'm not a banker/economist nor accountant BUT - whatever happened to all that TOXIC stuff the world was invested in ? Has that all been cleaned up or are banks still carrying that stuff around ?

Sun, 11/01/2015 - 16:51 | 6737722 BiPolarFrenchman
BiPolarFrenchman's picture

My understanding is that most of it was transferred to either government or central bank balance sheets - crossing the event horizon from scrutiny.  

Sun, 11/01/2015 - 16:54 | 6737727 divedivedive
divedivedive's picture

So Zirp (or Nirp) could be just a prolonged means of cleansing these balance sheets of the waste ?

Sun, 11/01/2015 - 16:47 | 6737707 DCon
Sun, 11/01/2015 - 17:27 | 6737811 Amish Hacker
Amish Hacker's picture

Somewhere there's a teenager sitting in his parents' basement with a laptop, and he's the one who's going to take the blame for this mess.

Sun, 11/01/2015 - 17:39 | 6737834 km4
km4's picture

> The Fed is operating a zero rate policy for the longest period ever (even exceeding the WW2 Aug’37-Sep’42 zero rate period)

For good cause i.e WW2 

> 2008 - present the biggest global asset bubble in the history of humanity continuing the QE ruse and enriching the 1% is NOT a good cause and one would think cannot continue much longer 
Sun, 11/01/2015 - 17:56 | 6737887 Rhal
Rhal's picture

Having investment returns lower than the (real) inflation rate is a sneaky form of deflation. As usual, they rip it off of the middle class while the elite get the insider investments. 

Sun, 11/01/2015 - 18:32 | 6737957 Raymond_K._Hessel
Raymond_K._Hessel's picture

god damn....

money markets are like 1.20 i think.

cds around 2.0

But I guess if yourre goldman sachs getting your money for nothing, it makes all the portfolio sense in the world to turn around an use that money to buy at even .5% - hundreds of millions of reasons...

Uncle Sugar sure loves him some discount window bandits.

Sun, 11/01/2015 - 19:15 | 6738033 grunk
grunk's picture
$20 Trillion In Government Bonds Yield Under 1%

For now.

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