$5.5 Trillion In Government Bonds Now Have Negative Yields, Covering 23% Of Global GDP

Tyler Durden's picture

First thing this morning, after the BOJ's announcement of negative rates which promptly pulled all treasury yields around the globle lower, we asked a simple question: how big large the global negative rate bond universe grow to?

Promptly thereafter the FT was kind enough to do the math: the answer - a record $5.5 trilion in government bonds are now trading at negative yields.

 

This means that about about one quarter of all global bondholders will end up paying their government custodians for the pleasure of parking their cash in the "safety" of government bonds.

The FT adds that "fears for economic deterioration and increasingly abnormal policies adopted by global central banks to ward off the threat of deflation have resulted in a bizarre scenario in which investors pay governments to hold their money.

Figures from JPMorgan show that negative rates, once considered only theoretically possible, now account for one quarter of the index for government bonds.

 

On Friday, yields on Japanese, French and German bonds hit record lows after the Bank of Japan decided to adopt negative interest rates, just over one week after governor Haruhiko Kuroda ruled the policy out.

 

In Europe, the first region to adopt negative interest rates, around half of all government bonds carry sub-zero yields, led by Germany, Finland and Switzerland, where negative yields extend all the way to bonds with 10 year maturity.

The chart below demonstrates how unprecedented today's bond situation is:as of this morning at least 13 countries had 2Y yields that were negative, and 10 nations could boast with negative rates all the way to the 5 Year mark:

 

And just to round out the picture, the WSJ adds that over a fifth of global gross domestic product, or 23.1%, will now be produced in countries that have negative interest rates, noting that the ECB and BOJ together are responsible for around 21% of global GDP. Swiss, Swedish and Danish GDP add up to less than 2.5% of the global total.

More:

So far the moves to negative interest rates have been relatively shallow, with almost all set at less than minus 1%. But even if the size of the move isn’t dramatic, the fact that banks are willing to do this is.

The conclusion: "Never before have so many central banks explored sub-zero territory at the same time."