Investors Fleeing $9 Trillion of Negative Yields Fuel Bond Binge

Whether you’re a government or a company in Europe, the U.S. or Asia, it’s a great time to sell bonds. Around the world, bidders are snapping up almost anything with a yield. 

Auctions of long-term debt by the U.S., Spain and Portugal all drew strong demand Wednesday, with the Treasury sale seeing unprecedented appetite from one class of investors. Japan sold 30-year notes Thursday at a record-low 0.319 percent. Buyers are also clamoring for company bonds, in a week that may be the busiest this year for corporate borrowing in the U.S. and Europe. 

On the one hand, the reach to pad returns shows that central banks’ efforts to push investors into riskier investments have been successful. But the phenomenon also means buyers are increasingly vulnerable to corporate defaults, or to rising interest rates. For the latter, that’s because debt with higher duration, such as obligations with longer maturities, suffers steeper losses when rates rise.

 Japan had no problem selling 30-year bonds Thursday even after they were called the “most overpriced security on the face of the Earth” by hedge fund executive Adam Fisher.(DYI completely agrees!)

DYI