Negative-Yield Bond Total Plunges on Biggest Slump in 19 Months

  • Market value of less-than-zero debt falls 13% since Sept. 30
  • Drop to $10.4 trillion on track to be steepest of the year

The market value of the world’s negative-yielding bonds contracted for the second week in a row and now totals $10.4 trillion.

The 3.1 percent drop puts the value of debt certain to lose money if held to maturity on track for its biggest monthly decline since December, when it shrank 14 percent. As of Friday, the sum had decreased 13 percent since Sept. 30, data compiled by Bloomberg show.

The unprecedented climb of the total market value of negative-yielding sovereign, government-related, corporate and securitized debt in the Bloomberg Barclays Global Aggregate Index peaked at $12.2 trillion in June, up from just $3.3 billion in July 2014.

The recent plunge in that figure came as the benchmark of debt prices fell 2.3 percent in two weeks, its biggest slump in 19 months, pushing up its yield 12 basis points to 1.25 percent, the largest jump since November. The yield on 30-year Treasuries surged Friday, extending the bonds’ biggest two-week decline since May 2015, after Federal Reserve Chair Janet Yellen hinted at letting U.S. growth and inflation run hot.

Japan, where policy makers have been trying to coax yields up since mid-September, remains ground sub-zero, accounting for 51 percent the world’s total. About 44 percent comes from Western Europe. Germany, France, the Netherlands, Spain, Belgium and Italy are the continent’s top five.

The U.S. accounts for $22 billion, just 0.2 percent of the global total, less than half the U.K’s $50 billion.

Less than a tenth of the world’s negative-yielding debt was issued by businesses, through corporate bonds and securitized debt.

These totals include both new negative-yielding issues and bonds with prices that rose enough to push their yields into the money-losing zone. The Bloomberg Barclays Global Aggregate Index has a market capitalization of $47 trillion and includes investment-grade debt from 24 developed- and emerging-economy markets.

The benchmark gauge does not include maturities of less than a year, which tend to have lower yields, so the value of many short-term less-than-zero bonds aren’t counted here. The totals are based on market values, which include accrued interest.

— With assistance by Aansh Mehta, and Neelima Vattikonda

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