Rani Molla is a Bloomberg Gadfly columnist using data visualizations to cover corporations and markets. She previously worked for the Wall Street Journal.

Lisa Abramowicz is a Bloomberg Gadfly columnist covering the debt markets. She has written about debt markets for Bloomberg News since 2010.

Bond markets aren't supposed to work this way.


As central bankers in Europe and Japan experiment with negative-rate policies to ignite their economies, investors are essentially being charged a fee to own about $7.7 trillion of sovereign debt.

How big of a tax is this on bond buyers? Well, here's one way to get a sense of it: Investors would lose about 71 billion euros ($78 billion) if they were to buy all of Germany's negative-yielding bonds coming due in more than two years and held them to maturity, according to calculations by Bloomberg Intelligence analyst David Powell. That's almost the size of Sri Lanka's entire annual economic output.

And consider this: Germany accounts for only about 11 percent of the negative-yielding debt in the world right now, according to data compiled by Bloomberg. So the amount of money that investors would theoretically lose is much, much greater.

Breaking Bonds
Globally, negative-yield bonds total $7.7 trillion. Total negative-yield bonds by country of domicile:
Source: Bloomberg

After all, the current volume of negative-yielding bonds globally is roughly equal to the economic output of most major countries in the Americas excluding the United States.


Of course, this is an entirely hypothetical exercise. Many investors aren't planning to hold this debt until maturity. Some are counting on yields to go even more negative, meaning that prices would increase, allowing them to get out without losses or even a profit if and when they want to.

How did we get here? In 2014, the European Central Bank became the first top central bank to lower deposit rates below zero and followed that up with an additional cut to already-negative rates in December. The Bank of Japan evidently liked what it saw because it opted to surprise markets in January by adopting its own negative interest-rate strategy.

The goal is to ignite growth and inflation. Japan has been mired in a decades-long economic slump, and Europe has failed to get fully off the ground after the 2008 global credit seizure. The idea is that if investors are charged to keep their money in cash or cash-like securities, then they'll actually spend more on riskier assets, bolstering businesses and creating a virtuous cycle.

In reality, it's unclear whether these unprecedented policies actually work to help economies expand. So far, investors seem content to buy more and more of these bonds, even as they're paying a growing premium for the privilege of lending to developed nations.

No one knows how this story will end because no one has ever seen such a huge amount of debt that yields nothing. It's unclear whether it'll actually help bolster growth, but these policies are clearly placing a multibillion-dollar tax on savers and risk-averse investors.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the authors of this story:
Rani Molla in New York at
Lisa Abramowicz in New York at

To contact the editor responsible for this story:
Daniel Niemi at