• Trend may complicate Fed's efforts to tighten: Fitch analysts
  • Ratings firm estimates negative-yielding debt at $9.9 trillion

Bond investors seeking alternatives to negative yields in Japan and Europe by buying Treasuries and government securities in other countries may keep long-term interest rates down, according to Fitch Ratings.

The trend may complicate efforts by the Federal Reserve to tighten monetary policy, Fitch analysts Robert Grossman, Bill Warlick and Jonathan Boise said in a report released Wednesday.

“Insurance companies, banks, pension funds and money-market funds are heavily invested in government debt,” they wrote. “Despite gains booked on many of these securities over the last several years, yields for these institutions’ portfolios have fallen sharply, and their ability to maintain profits has been reduced.”

Fitch is joining the effort to decipher negative rates and determine how to react to them. They’ve caused such market turmoil that the Bank of Japan put out a report that answers questions including “Are you really doing negative rates?” and “What is deflation?” Billionaire investor Warren Buffett told CNBC in April he never expected borrowing costs to fall below zero, and that their full impact is unknown. 

The 14 major countries with at least one negative benchmarks security have $15.4 trillion in fixed-rate debt and a yield of 13 basis points weighted by market value, according to the Fitch report. The amount of negative-yielding debt totals $9.9 trillion, the report said. By contrast, the average yield in the Bloomberg U.S. Treasury Bond Index is 1.35 percent.

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