Negative Yields Create a Bad Case of Bond Trader FOMO
The risk-off mood in global markets is creating a mad dash for safe returns.
Don’t want to get left behind.
Photographer: Nocella/Hulton Archive/Getty Images
Bond traders around the globe seem to be gripped by the fear of missing out on some of the highest government-bond yields in years. To see this in action, just look at the market for negative-yielding debt.
Yields below zero percent don’t really make sense, of course. Why buy something that guarantees a loss, unless someone even more gullible will buy it at a higher price? Still, it was supposed to be a historical anomaly, chalked up to unprecedented monetary stimulus that global central banks would unwind. When the supply of negative-yielding debt reached its peak of more than $12 trillion in mid-2016, the 10-year Treasury yield was a paltry 1.32 percent and the Federal Reserve had only just begun to raise interest rates. The benchmark reached 3.26 percent two months ago.