Investors Wave Goodbye to Negative-Yielding Debt as Central Banks Fight Inflation
The global stockpile of subzero debt has fallen by $16 trillion since peaking in late 2020
negative-yielding government debt, including shortterm bills, at the end of June. In recent years, some buyers were content to shelter in the safety of government bonds, even at negative yields. But the proliferation of subzero debt also helped fuel a stockmarket boom, as many return-hungry investors judged there was no alternative to investing in shares. Analysts and investors say rising global rates are helping to prompt a rethink, even if rapid price rises will eat into real, or inflationadjusted, returns.
“When we’ve looked at the global bond landscape for the past handful of years, it’s just been unattractive because of the yields offered,” said Collin Martin, fixed-income strategist for the Schwab Center for Financial Research. “Now, this can potentially present an opportunity for fixed-income investors that there is finally income available.”
Flows into European government bond funds have accelerated this year, according to data from EPFR, which tracks buying and selling of exchange-traded and mutual funds by both individual and institutional investors. Those funds have pulled in about $12.8 billion so far this year, according to EPFR data through July 20, more than three times as much as the amount received in all of 2021.