Value in negative yields - Is there such a thing?


Negative yields are widespread across significant swathes of the world’s bond markets at the moment. This paper considers what rationales there may be for this phenomenon being justified.

  • More than a quarter of the world’s bond market currently yields less than zero percent, including almost all of the German government’s debt.
  • Economic theory would suggest that negative nominal yields imply deflation.
  • Central banks may loosen monetary policy still further, pushing official rates even lower, in an attempt to stimulate economic growth. It is questionable how effective this might be.

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The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested.

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