Negative-yielding corporate debt poses risks for investors 'unlike anything they've ever seen'
Investors don't actually pay to borrow money, but the negative yield is symbolic of how much above par investors are willing to pay for these bonds.a bet that rates will stay low
For instance, Bianco said, if yields on Swiss bonds go up just 2 percentage points, it would amount to a 50% loss for holders. While some individual investors might be able to absorb such losses, they would be catastrophic for institutions.On the sovereign side, Germany is the starkest example of negative rates, with yields all along the curve there trading below zero. That has pushed prices up dramatically. In Thursday trading, buyers were paying the equivalent of $195.
"They've so flooded their financial system with money that there's not enough alternatives," he said. "That's why you have people paying such astronomical prices that you wind up with negative yields."The $27.8 trillion of non-U.S. dollar investment grade global debt is collectively yielding just 0.11%, according to Hans Mikkelsen, credit strategist at Bank of America Merrill Lynch. Of all global IG debt delivering any yield, 95% is from the U.S.
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