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the Bank of Japan even longer.

“This is quite a tricky situation,” says Frankfurt-Trust’s Kind. He worries that with bond prices so high, investors are vulnerable to a selloff if the consensus on future rates and inflation proves wrong. Still, Kind has bought negative-yielding bonds in recent weeks. “It’s tough at these levels, but at the moment there seem to be few alternatives,” he says.

Consider the case of U.S. Treasuries. David Ric, head of absolute-return fixed-income strategies at the asset manager Amundi, calls them “the least ugly duck out there.” Federal Reserve Chair Janet Yellen bucked the trend among central banks by raising short-term rates in December by 0.25 percentage points from nearzero. Even so, 10-year U.S. debt yields only 1.7 percent, down about half a percentage point since the start of the year. That’s much better than the 0.14 percent investors are getting for 10-year German bonds—until currency exchange is factored in. Treasuries gained about 1.1 percent in February, but Europeans holding them lost 0.77 percent in euros as the value of the dollar fell. It’s possible to use hedging contracts to eliminate such currency risk, but the cost of doing so results in a return that’s no better for Europeans than buying German bonds.

Japanese investors face a similar lack of options. Factoring in assumptions about future interest rates and foreign exchange, a Bloomberg analysis shows that 10-year U.S. Treasuries are likely to yield -0.7 percent in yen. For now, that leaves European and Japanese investors facing the prospect of losing money in order to save it. Says Allianz’s Vittorangeli: “We are in a totally new world.”

The bottom line Investors are willing to pay so much for some government bonds that they are locking in a negative return.