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Three-quarters of euro govt bonds, a record high, now have sub-zero yields

  • The market value of euro area sovereign bonds with yields below 0% rose to around 6.53 trillion euros, or 73.25% of the total market as of the end of October.
  • Large swathes of peripheral bond markets joined the negative yield club last month as expectations for more European Central Bank stimulus grew.
02 Nov 2020

LONDON: Three-quarters of the 8.9 trillion euros ($10.35 trillion) worth of euro zone government bonds traded on Tradeweb had negative yields at the end of October, a record high, data from the electronic bond trading platform showed on Monday.

The pool of bonds with sub-zero yields, which effectively means investors are paying governments to hold their debt, widened further last month against the backdrop of a renewed surge in the coronavirus pandemic and expectations for more central bank stimulus to support the economy.

The market value of euro area sovereign bonds with yields below 0% rose to around 6.53 trillion euros, or 73.25% of the total market as of the end of October, Tradeweb said.

This was up from just over 6 trillion euros at the end of September and marked a record high in the data going back to 2016.

Large swathes of peripheral bond markets joined the negative yield club last month as expectations for more European Central Bank stimulus grew.

In Italy, for instance, sovereign bond yields out to four years now have negative yields versus out to three years a month ago.

Long-dated bond yields in Spain and Portugal have also lurched closer to the 0% barrier .

"When you have a worsening situation in terms of the coronavirus, you have a worsening economic outlook and increased expectations for more ECB stimulus," said Rene Albrecht, a rates strategist at DZ Bank. "So, that was a major factor in the move down in bond yields."

The market value of UK government bonds traded on Tradeweb with a negative yield was relatively stable at the end of October at around 1.2 trillion pounds, or 48% of a market worth around 2.5 trillion pounds.

According to Tradeweb, the pool of euro-denominated investment grade paper accounted for 1.37 trillion euros or almost 40% of a market worth roughly 3.5 trillion euros at the end of October. That marked the highest since August 2019 and was up from around 29% at the end of September.