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Interest Rates: Naturally Negative?
By Advisor Perspectives
It is no longer absurd to think that the nominal yield on U.S. Treasury securities could go negative. Last week the German 30-year government bond yield dipped into negative territory for the first time ever. Around $14 trillion of outstanding bonds worldwide, or 25% of the market, now trade at negative yields, according to Bloomberg. What was once viewed as a short-term aberration – that creditors are paying debtors for taking their money – has already become commonplace in developed markets outside of the U.S. Whenever the world economy next goes into hibernation, U.S. Treasuries – which many investors view as the ultimate “safe haven” apart from gold – may be no exception to the negative yield phenomenon. And if trade tensions keep escalating, bond markets may move in that direction faster than many investors think.
Read more at Advisor Perspectives.
Photo: Tsahi Levent-Levi