Evidence That Negative Yields Are Finally Shrinking Around the Globe, Sort Of

With news that the Bank of Japan will continue on its quantitative easing path, and with accommodative policies in Europe and the United States, there is still a massive amount of sovereign debt trading around the planet with negative yields. Yep, you get less money back than you invested.

For investors and savers alike, there finally may be some good news coming. Or maybe the news is just less bad. Fitch Ratings is reporting that, as of September 12, the sovereign debt with negative yields has fallen to $10.9 trillion.

Japan is still the largest single nation contributing to the total. In fact, Japan’s tally was a whopping 63% share of the global sovereign negative yields. What is amazing is that this represents a decrease of $1 trillion since June 27.

Fitch noted that the global universe decreased primarily due to yields for longer-dated maturities, of seven years and longer, moving into positive territory.

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European countries follow Japan for negative yields. Another issue to consider is that these European countries also have the lowest aggregate yields (the most negative that is). Germany was shown to be leading the way at negative 30 basis points.

To show a contrasting view: the comparable average yield on $38 trillion in investment-grade sovereign debt from 34 countries is actually 84 basis points.

Here is how much the negative yields are hurting savers and investors: Fitch calculated that investors in the $38 trillion of investment grade sovereign debt are earning nearly $500 billion less annually in investment income than they would have earned with yields available in 2011. That has pinched income for banks, insurers and pension funds.

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