The adoption of negative interest rate policy by the likes of the European Central Bank and Bank of Japan, among others, has had a dramatic impact on bond markets.
Great swathes of bonds now trade with negative interest rates, boosted by central bank policy and asset purchases, constant deflation concerns, tepid economic growth forecasts and, despite a recent recovery in risk assets, lingering elevated levels of risk aversion.
This excellent chart from Bank of America-Merrill Lynch (BAML) is currently doing the rounds, and it’s easy to see why.
It’s a beauty!
Image may be NSFW.
Clik here to view.
It breaks down the share of the global fixed income debt that currently trades with a positive yield compared to those yielding below zero.
According to calculations from BAML’s European credit strategy team, 23% of bonds globally yield less than 0% at present, up substantially on 13% level seen the beginning of the year.
Based on the chart above, that equates to around $9 trillion in bonds that are currently trading with negative yields, a figure that could grow even larger should the current trend be maintained.
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