As global investors get accustomed to a world deep in the red, they have repriced risk -- which some argue is only inflating a bubble. Around $12 trillion of bonds have negative yields.
Anne Richards, CEO of Fidelity International, says negative bond yields are now of systemic concern.
“With central bank rates at their lowest levels and U.S. Treasuries at their richest valuations in 100 years, we appear to be close to bubble territory, but we don’t know how or when this bubble will burst.”
The IMF in October said lower yields are spurring investors such as insurance companies and pension funds “to invest in riskier and less liquid securities,” as they seek higher returns.
“Debt is not a problem as long as it is sustainable,“ said Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis SA in Hong Kong, who previously worked for the European Central Bank and Bank of Spain. “The issue is whether the massive generation of debt since the global financial crisis is going to turn out to be profitable.”
--With assistance from Zoe Schneeweiss.
This article was provided by Bloomberg News.