So 2021 – Negative Yielding Bonds are Back!
By Julien B. Booth
August 2, 2021
I hope this note finds you well.
Mondays are always better with a bit of humor. The picture below is the yield curve of Germany.
A yield curve depicts the interest rate you would be paid based upon the term structure (length of time invested).
Ostensibly, yield curves would provide an investor POSITIVE return over any given time.
NOT SO says the German Government bond sector.
This picture is the present yield curve of German Govt. bonds – note the yellow line is the 0% bound.
The entire Germany yield curve now has negative yielding returns for investors buying today.
Bond markets are global by their nature, so we can expect downward pressure on U.S. yields as German (and other intl.) investors flee the prospect of their negative yielding markets.
While this raises bond prices; it is not reflective of a healthy and functioning market.
This picture does NOT include the effect of inflation.
What a world!
Julien B. Booth
Chief Investment Officer – Fixed Income & Real Assets
BRC Wealth Management