Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

A Race to Hell: Negatively Yielding Debt Tops $15 Trillion for First Time Ever

  by    0   0

Negative yielding debt has exceeded $15 trillion globally for the first time ever.

This pile of negatively yielding paper includes government and corporate bonds, along with some euro junk bonds.

WolfStreet called it a “race to hell.”

As the Financial Times put it last month, negative bond yields were once considered to be “economic lunacy.” Now they are economic normalcy.

The Federal Reserve could have at least slowed the race down this road to hell with ist normalization project, but that didn’t go very far. The amount of negative-yielding bonds has grown precipitously since the Fed did a monetary policy 180 with the Powell Pause earlier this year. The European Central Bank poured fuel on the fire when it hinted at new rate cuts and even another round of quantitative easing.

The Fed has now taken another step in the opposite direction with its first interest rate cut in over a decade last week. Peter Schiff says this is the first cut on the short road to zero. That will likely mean even more negative-yielding debt. And as WolfStreet put it, the NIRP zone is already growing like an octopus.

In Germany, there are no longer any bonds trading with a positive yield. According to WolfStreet, “The German 30-year yield, for bonds due in 2048, the longest term available, dipped into the negative briefly on Friday for the first time and sank solidly into the negative on Monday and Tuesday, currently at negative -0.036%.”

The Swiss 30-year bond has been negative since mid-2016. It is currently at -0.322%.

Meanwhile, there are now 12 countries with 10-year bonds with negative yields.

1Switzerland-0.92%
2Germany-0.53%
3Denmark-0.49%
4Netherlands-0.43%
5Austria-0.30%
6France-0.27%
7Finland-0.27%
8Sweden-0.21%
9Belgium-0.20%
10Japan-0.18%
11Slovakia-0.14%
12Slovenia-0.04%

There are some countries where you can get some solid positive yields. For instance, 10-year yield on Zambia’s euro-denominated bonds is now over 31%. Of course, that country’s credit rating is just a tick above default. Government debt in Zambia has ballooned from about $2 billion in 2011 to over $10 billion last year. There are also allegations that the government is even deeper in debt and is hiding the fact. So, maybe not your best bet.

You could try Turkey. The 10-year yield there is 15%. Of course, the country remains mired in a currency crisis.

Or you could check out some central American countries like Argentina and Mexico. They have solid bond yields, but watch out for inflation.

We’re also seeing a precipitous rise in negatively yielding corporate debt, according to Bloomberg, as of last month it comprised nearly a quarter of the investment-grade market.

And as companies take advantage of low interest rates to borrow more, issuance has helped drive junk bonds outstanding to more than $1.23 trillion, more than double the level a decade ago.”

Here’s the $64,000 question: why are people pouring money into negative yielding bonds? At some point they are going to figure out losing money over time isn’t a great investing strategy. Perhaps at that point, they will turn to gold and silver.

In fact, there is a strong correlation between the rising level of negatively-yielding debt and the price of gold, according to the World Gold Council.

As global yields continue to fall, and in some cases turn negative, there appears to be a direct correlation between global net negative yielding debt and the price increase in gold, highlighting that as yields decrease, the opportunity cost of holding gold decreases making it more attractive.”

There is no end in sight to the central bank policies driving this pile-up of negative-yielding debt. And while the Fed has said it is not moving toward a sustained rate-cutting cycle, more cuts are almost certainly on the horizon. That means we can expect even more negative yields in the future.

Download SchiffGold's Gold vs GLD EFT's Guide Today

Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!

Related Posts

The Tax Man Cometh! And Not Just for Billionaires

The tax man cometh! And thanks to the Democrats in Congress, there will be more tax enforcers shining their lights into the nooks and crannies of Americans’ finances.

READ MORE →

Fed Balance Sheet Reduction Not Delivering as Promised

The Federal Reserve is all-in on the inflation fight. Or is it? While everybody focuses on interest rate cuts, the promised Fed balance sheet reduction isn’t going quite as promised.

READ MORE →

Record Consumer Debt Levels Continue to Climb

Consumers continue to add to their record level of debt as higher prices squeeze wallets. Americans added another $40.1 billion to the debt load in June, according to the latest data from the Federal Reserve. That represents a 10.5% year-on-year increase.

READ MORE →

Central Banks Added Gold at Faster Pace in June

Central bank gold buying notched up again in June. Central banks globally added 59 tons of gold to their reserves last month and there were no reported sales, according to the latest data compiled by the World Gold Council.

READ MORE →

Labor Market Showing Cracks as Job Openings Decline More Than Expected

Despite back-to-back contractions in GDP, President Joe Biden, Fed Chair Jerome Powell, Treasury Secretary Janet Yellen and all of their supporters in the corporate media insist the US economy isn’t in a recession. But the only data they ever point to in order to back up their assertion is the “strong” labor market. The problem […]

READ MORE →

Comments are closed.

Call Now