Congratulations to Switzerland for reaching the mind numbing achievement of negative yields on 50-year bonds.
The Financial Times reports Entire Stock of Swiss Bond Yields Turns Negative
As of today, Switzerland’s entire stock of government debt is now trading at negative yields – with the last to go a bond that does not mature for almost 50 years.
Yields on the Swiss 2064 paper dropped below zero for the first time on Friday, meaning investors are willing to pay more to hold the bond than they will get back in interest and repayment of principal, writes Elaine Moore.
Around the world, government bond yields have fallen to new lows this week as investors anticipate years of ultra-low interest rates.
The yield on benchmark, 10-year UK gilts has reached a fresh low of 0.78 per cent following the UK’s vote to withdraw from the EU and Bank of England governor Mark Carney’s announcement on Thursday that monetary easing was possible in the summer. Swiss 10-year bonds are trading at minus 0.66 per cent.
Swiss Yield Curve
Chart from Swiss Exchange.
Chart does not show 50-year bonds but they are negative too, for the first time today.
Congratulations!
Mike “Mish” Shedlock
Mish,
Any clues when there will be a bond revolt i.e when the world of fools who buy such bonds run out of greater fools to sell to and have to eat the losses…
Don’t worry, it’s all OPM (Other Peoples’ Money) anyway. Nobody is stupid enough to be doing this with their own money.
And the parasites who are buying these guaranteed-money-losing-bonds with Other Peoples’ Money, charge the “Other People” a “management fee” to do it!
You simply cannot make this stuff up. That is how far down the rabbit hole this “monetary system” has gone with financialization.
Aren’t the greater fools the central banks? I would love to run out of THEM, but until Japan collapses central banks will always “be at the ready”.
I Don’t – But there will be a massacre
Agree, but it will be later rather than sooner. This frustrates me because I have my eye on a couple of bond funds that will make me giddy in my retirement beyond belief if I get them at the right price (crash low). Unfortunately, I think the printing press and European can kicking, accompanied by Fed support in all ways possible, will keep rates low long enough for me to age to the point where a good tv show and satisfying meal is a good day.
I really don’t understand why open hostility isn’t shown Janet Yellin when she meets with reporters and congress. Her theories are disproven, dangerous, and ludicrous. Yet they impact hundreds of millions adversely and only a few well. Her cowardice in not wanting to experience the consequences of her actions when they eventually revert to mean, with or without her Fed board in tow, is disgusting.
I agree and all I can conclude is the main street media are paid lackeys. No one challenges them on anything except blogs like this one.
dont banks and insurance companies feel the pain here? how do they stay in business
You definitely don’t want to insure that risk. Just a simple “normalization” to zero yield (say requiring by law all carried interest is banned and Banks may only charge a flat fee on the loan amount to be amortized over the life of the loan) will crush the buyers of this paper. No way am I long the Euro either. The dollar rates still have (BARELY!) some carry at least…and a positive basis…so far. But folks will start refinancing here shorting which is going to crush the balance sheets of the Banks I would think. Ironically London Banks look the best as the Pound has really gotten crushed here but again…you still have a positive basis and some carry there as well…and since the Pound is barely a reserve currency it can be devalued…and has been devalued…against the US dollar at will.
Not long oil, not lomg car dealerships, not long food companies, not long any debt other than Treasuries. Love silver…think gold miners are going to start ramping up product to a dramatic degree though because of how expensive a single ounce is right now. That doesn’t make me bullish on miners though. A famine in the West cannot be ruled out either incredibly.
Crazy
I just can’t get my head around negative rates. I don’t see how capital flows to good investments and how this an possibly lead to a higher standard of living in the future.
I think that retirement, savings and investment in productive assets end up being killed. We are left with government and wild speculation.
All of what you say is true, but low rates (no bond vigilantes) allow politicians to avoid tough decisions (cut spending … increase taxes) … for NOW.
Then you have Illinois – where all the tough spending cuts are delayed but who in their right mind would take their business without cash on the barrelhead?
http://www.riffyou.com/wp-content/uploads/2015/01/nirvana-nevermind-cover.jpg
the 1% at Davos a couple of months ago, with drinks after the meetings:
Did you see that negative interest rates are snowballing? I can’t believe it. Janet and Mario were dumb enough to believe us. Now they’re hooked but I don’t think they know yet. We’re doing so well thanks to them.It’s nice to own important people who just want to be helpful to us. Mario has been on board since Italy but Janet isn’t anyone to worry about. She’s with us. Did you read what Bullard said? He really bought it. We can control them so easily. A few million in donations to both sides and billions get returned. Life is good.
***********
News item: pensions down $45 billion in value. Negative interest rates and inflated asset prices the cause.
“Around the world, government bond yields have fallen to new lows this week as investors anticipate years of ultra-low interest rates.”
The massive debt overhang the culprit. As more and more $$s needed to service existing debt, the doom loop of weak demand / consumption —> disinflationary / deflationary forces —-> lower interest rates (repeat) will prevail.
Only until debt levels addressed via payback / write off will rates rise.
It is totally rational. When you know other investments are going down 30-50%, to lock in a mere 3% loss is prudent.
In the 1880’s the great silver interests in the USA got the Federal Government to pass a law guaranteeing a buyer for their silver…which not only did not cause the price of silver to soar but in fact caused the price to collapse.
Japan and Europe might be forced to start defining the price of silver in US dollars lest the correction in yields just to “normal” (zero) becomes so profound as to bankrupt their entire economies.
These are large institutional investors who manage “Other Peoples’ Money” for a fee.
They can’t leave this money in a large European Bank, because the amounts greatly exceed the deposit insurance limit and would thus be exposed to a potential “Bail-In Haircut”.
Just holding the S&P 500 still yields .02 or something like that.
Stay in stocks even though that too, is scary. Stop giving away your capital to psychopathic bankers.
If I short negative rate bonds do they pay me?