Financial World Gone Nuts: $15 Trillion Negative Yielding Debt

12 countries with negative 10-year yields. A race to hell.

Every day brings new indications that the financial world is going from already nuts to even nuttier. According to Bloomberg, the total amount of bonds outstanding globally that are trading with a negative yield exceed for the first time $15 trillion. This includes government and corporate debt, and also some euro junk bonds that have joined the elite group (click to enlarge):

A chart like this, of markets and central banks chasing each other further and further into the negative-yield absurdity, is crying out loudly: “Somebody has got to put a stop to this race to hell.”

The Fed was dabbling in trying to stop this race that is now leading ever deeper into negative-yield absurdity, and had even tried to reverse it, and got shouted down as can be seen in the above chart.

The good news first:

Yes, there are still juicy yields out there, but you have to risk your first-born to get them, if you’ll ever get paid the interest or principal. For example, Zambia. The 10-year yield on its euro-denominated bonds is now over 31%.

Moody’s rates Zambia’s government debt Caa2, just three tiny notches from default (my plain-English cheat sheet for credit rating scales by Moody’s, S&P, and Fitch). Moody’s cited the high debt burden, liquidity risk, and external vulnerability.

On June 19, Zambian President Edgar Lungu announced that “Zambia is not in a position of a crisis.” He had some wise words for creditors and debtors alike:

“When you find that you are being strangled by debt, you hold back and see how you can realign your position so that in the end you continue being alive, you don’t suffocate. That’s where we are now.”

Investors, and the bankers that made all this possible, and China’s strategy to put its imprint on Africa have left their mark.

Zambia’s government debt was $2 billion in 2011. And that was manageable for a small poor country with big challenges. Then the bankers got a hold of investors who were chasing yield in the world where NIRP had arrived. And the Chinese construction boom, funded by Chinese loans, washed over Zambia with new airports, roads, and factories. By 2018, so in just seven years, Zambia’s official debt had quintupled to $10 billion.

But last year, suspicions arose that the debt was even larger, and that the government was hiding some of its debt. It wouldn’t be that far-fetched. Mozambique’s government had to admit in 2016 that it had hidden $2 billion in debt.

So maybe Zambia is not such a great place to chase yield. Maybe something like Turkey’s government bonds would be better. The 10-year yield is 15%. Turkey is currently in a financial crisis and a currency crisis, and outcomes remain iffy.

Or try Argentina’s dollar-denominated bonds. Argentina’s inflation tends to run between 20% and 40% a year. But these are dollar bonds, so Argentine inflation doesn’t impact them. They’re impacted by the risk of default. Argentina is the king of defaults, defaulting with utmost reliability on its foreign currency debts and then attempting to impose haircuts on its creditors. But current creditors don’t seem to mind future haircuts, and the 10-year yield is only 6.2%. If you need a haircut, go for it.

Then there is Mexico where the 10-year yield on peso debt is 7.7%, which is above Mexico’s rate of inflation, but not by much. Inflation exceeded 6% in 2017 and is currently running at around 4%. And 10 years is a long time for inflation in Mexico to run wild again, which would wipe out the purchasing power of these bonds.

But this is the kind of thinking you do when trying to escape negative yields or near zero yields.

The bad news: the NIRP zone is growing octopus-like.

There are no more German government bonds that trade with a positive yield. The German 30-year yield, for bonds due in 2048, the longest term available, dipped into the negative briefly on Friday for the first time and sank solidly into the negative on Monday and Tuesday, currently at negative -0.036%.

The Swiss 30-year yield has been negative since mid-2016 and is now at negative -0.322%. But the Japanese 30-year yield is still positive at +0.29%.

Investors who buy these bonds hope that central banks will take them off their hands at even lower yields (and higher prices). No one is buying a negative yielding long-term bond to hold it to maturity.

Well, I say that, but these are professional money managers who buy such instruments, or who have to buy them due to their asset allocation and fiduciary requirements, and they don’t really care. It’s other people’s money, and they’re going to change jobs or get promoted or start a restaurant or something, and they’re out of there in a couple of years. Après moi le déluge.

10-year yields.

There are now 12 countries on my list whose government debt sports negative 10-year yields. Switzerland is the master, with a 10-year yield of -0.92% followed by Germany, with a 10-year yield of -0.53%, down to Slovenia in 12th position with a 10-year yield barely in the negative of -0.04%. Japan is in 10th place.

The US, with its 10-year yield today of 1.73% is in 30th position on my list of 51 countries and their 10-year yields as of August 6, 2019 (see list below). This puts the US two places behind Italy, in 28th place, with a 10-year yield of 1.51%. Think about this for a moment: The list has only 51 places, and the US with a ridiculously low 10-year yield of 1.73% is all the way down in 30th position!

Greece, which defaulted on its debts in 2012 and imposed big haircuts on holders of Greek government bonds, is in 33rd place with a 10-year yield of 2.02%.

At the bottom of the list is, well, Zambia. Nigeria, Pakistan, Turkey, and Egypt make up the remainder of the double-digit club:

Pos. Country — August 6, 2019 10-yr yield
1 Switzerland -0.92%
2 Germany -0.53%
3 Denmark -0.49%
4 Netherlands -0.43%
5 Austria -0.30%
6 France -0.27%
7 Finland -0.27%
8 Sweden -0.21%
9 Belgium -0.20%
10 Japan -0.18%
11 Slovakia -0.14%
12 Slovenia -0.04%
13 Ireland 0.04%
14 Spain 0.23%
15 Portugal 0.27%
16 Bulgaria 0.45%
17 UK 0.52%
18 Taiwan 0.68%
19 Australia 1.04%
20 Croatia 1.05%
21 Czech Republic 1.06%
22 Israel 1.06%
23 Hong Kong 1.17%
24 Norway 1.18%
25 Canada 1.23%
26 South Korea 1.24%
27 New Zealand 1.29%
28 Italy 1.51%
29 Thailand 1.71%
30 US 1.73%
31 Singapore 1.77%
32 Hungary 2.01%
33 Greece 2.02%
34 Poland 2.09%
35 Chile 2.79%
36 China 3.08%
37 Iceland 3.85%
38 Romania 4.23%
39 Philippines 4.55%
40 Argentina 6.20%
41 India 6.34%
42 Brazil 7.26%
43 Russia 7.31%
44 Mexico 7.43%
45 Indonesia 7.70%
46 South Africa 8.40%
47 Nigeria 13.69%
48 Pakistan 13.77%
49 Turkey 15.10%
50 Egypt 15.60%
51 Zambia 31.25%

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  170 comments for “Financial World Gone Nuts: $15 Trillion Negative Yielding Debt

  1. Gandalf says:

    This is where the intersection of capitalism and socialism has gone berserk – the privatization of profit, and the socialization of risk and debt. It was bound to happen, as plutocrats always learn how to manipulate political systems to their financial gain…. until their sheer greed blows up

    • Manu says:

      Nigeria’s 2030 Eurobond currently yields 6.91 while its 2049 bonds yields 8.22

    • NBay says:

      Sorta like normal, usual, expected, dynasty forming, corporate extortion was just put on an installment plan by CBs now, as opposed to big ballon payments after they tear up country, as in after ’08 FC? More creeping austerity for peasants, with most politicos firing them up for both well entrenched, well paid clubs (I mean parties), to keep “democracy” “rule of law”myths alive.

    • historicus says:

      Exactly. Central Banking is “central planning” by committee. Is that not an earmark of Socialism?
      And the negative rates are implemented in Europe to stimulate flailing socialist economies..
      and now because of the currency / rate arbitrage, the mess to the US.

  2. Doug says:

    My guess is that many of these negative rate investors will be losing much more principal than what they were promised as rates increase at some point in history.
    With every country fighting to devalue their currency at the same time , probably sooner than expected

    • 2banana says:

      Even though corporations are portrayed as evil and cold hearted and government the solution to all problems…

      Where would you rather put $10,000 of your hard earned money?

      Argentinian bonds at 6.2% or ATT stock at 6.0%?

      Which do you think will even be around in five years – let alone getting your money back?

      • MD says:

        Absolutely no-one said government was the solution to all problems – that’s a straw man you constructed yourself.

      • Unamused says:

        And yet, government is the only hope you have for the survival of civilization and the survival of the species. Government doesn’t have to solve all problems, or any of them. It only has to control enough of them.

        The concerns of finance are the least of your problems, so let’s put them aside for a moment.

        You forget why humans have governments in the first place. You forget why any living organism would evolve cooperative ecological and social systems at all.

        You forget that life is essentially a self-actuating mechanism for reducing the entropy of a collection of matter by increasing the entropy of its environment, so as to enable it to exploit resources to grow, reproduce, survive, and evolve. All very thermodynamic, but then, in one way or another, so is everything. In the absence of any restraint such a mechanism inevitably ruins its resources in the process of overexploiting them and ends up ruining itself. Monsters, sir. Monsters of the id.

        Like The Machine said, It is in your nature to destroy yourselves. Therefore your existence depends on restraining your destructive nature so it does not become self-destructive. Organic evolution only ever proceeds so far without the complementary evolution of restraints. In humans these are manifested in social systems: families, clans, customs, religion, culture, governments, laws – every one is functionally a set of mechanisms of restraint, and every one of them imperfect but good enough to get by. Otherwise you get a die-off like a bacterial culture in a petri dish that exhausts its resources and suffocates.

        Ingenuity ultimately enables humans to overcome almost any external restraint, so it becomes necessary for humans to recognize that self-restraint and restraint of others is in the interest of their own survival. This is where you are now. People lacking in self-restraint are presently in the ascendant. Government, meaning other people, is the one and only available mechanism which could restrain them, and when governments finally fail the tendencies of self-destruction will succeed, and that will be the end of you.

        And they will certainly fail. They always do. Normally replacements evolve. But this time the will and the technical ability exists to cause them to fail completely and permanently. That’s why you’re doomed. And that’s why it’s inevitable.

        Believe it or not, economic and financial systems operate on very much the same principles, and fail for very much the same reasons: the failure of systems of control to prevent the success of self-destructive tendencies.

        • Setarcos says:

          Yes, economic systems are expressions of nature. Reminds me of a guy I am aquainted with who amassed a fortune by supplying people with things and then used his own money to build a childrens hospital. It was his nature to do these things.

          We only recognize that with which we have context. The “nature to destroy”, which you seek to restrain, exists within the restraints you envision as well. Your incredible intellect allows you to recognize the futility of it … and yet you also cling to it. Clinging limits context.

          Less time with Aristotle and more with Plato.

        • sierra7 says:

          And I thought I was “alone” in this world!! LOL!
          ur post: +1000 (with many more added zeroes!)

          Also “Gandalf” post right on target as well!

        • Tom Pfotzer says:

          @Unamused: well done. Here’s a question for you:

          Suppose an individual wanted to conduct a top-to-bottom referendum on the cultural/social institutions he subscribed to.
          What would be the criteria to select new ones, or design them if they didn’t currently exist?

          Wolf, pls bear with me. I assert this has economics relevance because we’re clearly going to have to allocate financial resources bottom-up (e.g. the people on this list), since top-down decision-making by the Fed, Congress and the Great Investors of our Time… are clearly incapable of changing our trajectory.

          They’ve had plenty of time to adapt, and it ain’t happenin’.

        • NBay says:

          G.Damned FN well written! Short yet totally inclusive. May be a bit over Banana’s head, or past his attention span, though, but other than that, I just miss the usual laugh I get from ya. I will add it to my WR file anyway, maybe claim credit elsewhere, too.

        • NBay says:

          “Less time with Aristotle and more with Plato”
          Did you perhaps also fight your way through “Science and Sanity”? I was lucky, had 2 weeks alone in Uncle’s mountain cabin to do it, and could take walks in snow when brain got fried.

      • I can make a case for Argentina, bonds denominated in dollars, IMF backing, an emerging market vs a bloated and overbought developed market. Stock analysts are bullish on the EM. Maybe you can’t judge them on their past any more than you can judge the US? ATT has a lot debt.

        • NBay says:

          Forgot about IMF, just like I never guessed QE and lost big time (for me) in FC. But then I’m here to learn Econ.

      • NBay says:

        A rather amateurish hypothetical forced choice question, Banana, IMHO. Either raise $ amount considerably, or add more choices, otherwise I won’t play your obviously rigged “game” with you. Or maybe get a Psych degree and refine it?

        PS: Corporations are not evil and cold hearted as they are now actually “people”. (You really should spend some more time reading our government’s “solution” laws).

        Most all “people” aren’t evil and cold hearted, they actually want to get along with well with each other, or haven’t you noticed that in your day to day life?

        Condolences if you haven’t, in which case I will pray for you.

  3. Nicko2 says:

    Forgot Egypt, was trending around 18% last year, now around 15.6%.

    • Wolf Richter says:

      Thanks! Included now.

      • EcuadorExpat says:

        In a double entry accounting system, numbers are supposed to balance out. Wolf, you should inform your readers why this is not the case. Could it because there is no longer fractional reserve lending, but rather zero reserve lending, in other words banks don’t lend reserves, they just create what they lend out. That would make for the really cheap money we see today.

        Back in my day a major tool of the federal reserve was the reserve ratio dictated to banks, which controlled the money supply which is increased by fractional reserve lending.

  4. Keeper Hill says:

    We should be issuing long dated debt as much as possible.

  5. Dave k. says:

    Took a few Econ classes in college. Glad I didn’t like the professor and barely paid attention….what school of Econ is this going to spawn? ha

    • WT Frogg says:

      @ Dave k Yeah but that Samuelson textbook from Econ 101 made a great door stop. Lol.

      Economists remind me of the old definition of critic : Someone who knows the way but can’t drive.

    • Gandalf says:

      That school of economic theory already exists and has a name – Modern Monetary Theory. An endless supply of free fiat money, debt out the wazoo, and Magical Non-Inflation, are the key ingredients

      • Patience says:

        As Wayne Jett puts it in the fruits of graft, it’s mercantilism.

      • Old-school says:

        I predict MMT will be short lived. It’s a good sounding theory with a bad premise or two. Its being kicked around because inflation is supposedly low. That’s basically bull crap. Inflation at 1.5% fulfills the definition of a stable currency better than inflation at 2%. MMT will die when the government has spent too much money which it is close to doing. I think inflation is always caused by governments spending too much. We are buying a lot of guns and handing out a lot of butter ( health care and education.)

      • radar_x86 says:

        Modern Monetary Theory is a fatally flawed monetary theory and those who implement it are headed for disaster. It’s as stupid and illogical as Marxism but unfortunately 100’s of millions of people had to suffer and die under that evil theory as well. I truly feel for our future if any of the politicians that expose MMT ever get to implement it.

        • NBay says:

          Marx is still considered an Econ genius. “Kapital” is required reading for Econ. They don’t even say “Das” when recommending it to newbies, anymore.
          Your beef is more likely with Stalin, (who wasn’t very bright, like many leaders lately “expose”).
          Let not your heart be troubled.

  6. HR01 says:


    Correct me if wrong, but the entire Swiss curve out to 50 years is negative.

    Little itty-bitty Portugal considered a far better credit risk than the U.S. Treasury. Let’s see, Portugal has a debt-to-GDP ratio greater than 125% and its economy is less than 1/80th the size of the U.S. economy.

    This is your bond market on psychotropic drugs.

    Must we wait for Argentina’s 100-year bonds to go negative before the madness ceases?

  7. RagnarD says:

    To my eyes a negative yielding bond is screaming, “but gold! Buy silver! Buy oil!”

    U have the choice to Buy:

    a shrinking supply of toilet paper


    inherent wealth.

    Take ur pick.

    Then Let’s set a date to talk about our choices 5 to 20 years from now.

    • Brant Lee says:

      I’m wondering about choices six months from now.

      I don’t see losing on silver at $16. If so, not much and not for very long. A few pounds of silver hidden inside fake sewer pipes by the garage can’t hurt.

      • Nicko2 says:

        Probably a better move to invest in Sterling Silver Antiques, at least they have artistic value.

        • RagnarD says:

          Well, yes and no. That is, I’m no expert on antiques, but if you go to jewelry shop in Asia they simply sell used jewelry by weight, independent of craftsmanship.

          Not to say their aren’t classes of antiques / artwork that are highly valued.

          But then again, by playing the antique game, you are adding a sophisticated level of expertise (risk) valuation into the game.

          But that said, the fact that I bought a 24oz PBR beer at a concert last night for $13.25 + $1.75 tip = $15 ( near the price of an ounce of silver), makes me wonder why not selling everything I have AND then leveraging up to buy as much silver as I can get my hands on at these prices.

          If people literally had to hand over one oz chunks of silver for the nonsense we buy these days, it would be through the moon.

        • Paulo says:

          .22 bricks, copper and brass :-) Currency of the prepper blog sites, but still darn handy where I live. At least handier than silver unless you’re hunting vampire squids. arh arh arh.

        • RagnarD says:

          Hey Pirate, you have it backwards. Your predecessors / ancestors used the copper and brass to get the silver. :)

        • RD Blakeslee says:

          If really disastrous fiat money freeze and crash comes, pm-based currency will be informally but quickly established. One will be able to spend a 77% silver dime much more easily than a silver candlestick.

        • RagnarD says:

          And I happen to know about a bit about Vikings and Pirates:
          Ragnar Danneskjöld… the wiki has a section on me….

          One of Galt’s first followers, and world-famous as a pirate, who seizes relief ships sent from the United States to the People’s States of Europe. He works to ensure that once those espousing Galt’s philosophy are restored to their rightful place in society, they have enough capital to rebuild the world.

        • NBay says:

          Ragnar D
          Yeah, but she never played “jungle” with someone on his own territory, who got a Winchester single shot with hand cocked firing pin for his 7th birthday, and his redneck gun education began. .22 bricks will make those folks excellent pirates, if that is their choice.

      • Jz says:

        Where do u live?

  8. Bobber says:

    The low bond yields are a sign that stocks and RE are too highly valued. People are willing to lose a little in the bond market so they don’t lose a lot elsewhere.

    If you lose only 1% a year, when everybody else loses 50%, you just made a ton of money, relatively speaking. I wouldn’t call that a negative return in substance.

    Thus, the plan of many people is to hold negative yielding bonds until stocks crash. Central banks seem to be losing control, and I doubt they can prop stocks much longer.

    • Chris says:

      Great point!!

    • Pelican says:

      Why wouldn’t you rather stay in cash (or a checking account that pays 0 interest) than lose 1%? I guess I don’t understand this negative yielding bond thingy.. I get that the value goes up if the yield goes further into -ve territory, but still..

      • Zirp says:

        The problem is institutional investors with way too much cash to be guaranteed by the Fed as bank deposits. It’s a con, the Fed forces investors who want to park their money to buy government debt, now with negative interest rates!

        • Pelican says:

          Thank you! That makes sense.

        • historicus says:

          Zirp…there you have it..
          Flood the system with money, and give the holder of dollars few choices…..
          The governments are the great beneficiaries of the government empowered Central Bankers who are allegedly “apolitical”.
          Quite and arrangement.

      • Wisdom Seeker says:

        Euro-area bank accounts often pay negative interest, and they use fees all over to make cash a negative-yielding instrument as well.

        They don’t want you to have zero-yielding cash.

        The US has resisted better so far.

        Since banks’ interests are frequently opposite ours, it pays to question anything they advocate and generally do the opposite!

    • Jon W says:

      Yeah but the problem is as bond prices go more negative, even the most woeful asset yields start looking attractive. After a few months without a crash, some investors will jump back in and asset prices go up again. Then more concern sets in and bond prices go even more negative. The cycle then repeats.

      It is a positive feedback loop. Central banks cannot unwind this now, as if asset prices start falling the same positive feedback loop will cause another credit crunch. But on the negative side of interest rates they have no effective means to moderate (as soon as rates went negative vs inflation any quantity of debt becomes serviceable, even if you are making a loss).

    • Old-school says:

      I agree. Basically it is a deception, pulling forward perceived value today for less growth in the future. I think everyone is getting tired of central banks running central bank theory on society. Someone is going to be the bad guy for the crash. Might be Trump or might be Jerome Powell and Super Mario.

    • NBay says:

      Yeah, it’s all us little guys can do, but the really really big players don’t tinker with monetary policy, they tinker with fiscal policy.

  9. Paul Morphy says:

    Junk bonds, JUNK Bonds, are in NIRP territory as well.

    Despite their ratings.

    • bungee says:

      Are they still called “high yield” to make them more attractive?

      This is a great article, thanks for laying it all out Wolf.

      The market is telling us that U.S. debt and dollars are risky compared to that of other nations. Why else would its debt pay a higher yield. Maybe the cleanest-dirty-shirt theory will prove to be wrong. Maybe the shirt has no spots or wrinkles but is covered in measles?
      The market is also saying that we cant make money just for having money anymore. Like that weird fad of famous for being famous. Investing is going back to being hard. How it should be imo.

  10. Old Engineer says:

    Personally, I’d go for the Nigerian bonds. If they start to go south you could use the money to pay some Nigerians to work the phone banks and the old Nigerian Prince scheme should make you a mint in dollars. There are still a lot of U.S. suckers out there too.

    • a reader says:

      Zimbabwe bonds for me, please. They pay in those pretty 100 Trillion Dollar notes. Now, that’s some wealth!

    • buda atum says:

      Old Engineer, I’m taking offence! But that’s by the side.

      How does Argentina get to default and my Nigeria can’t? They just pile interest on and it bloats. Talk about the Corporate Fraud Scheme, why don’t we?

      I’m still offended, Old Engineer!

      • Old Engineer says:

        Buda atom, please accept my apologies, no offense was intended. But the scam phone calls from Nigeria we’re so common for many years that it has its own entry in Wikipedia. Today almost all of the scam calls come from within the U.S.
        Besides, I don’t know why you and Wolfe give Argentina a hard time. They do nothing that many U.S. companies don’t do on a regular basis. Wolfe did an article earlier in the week on shale companies who have made a business practice out of repeated haircuts. It is the Argentines who should be offended.

        • Awkward-Age Engineer says:

          How I long for the good old days, when broke Nigerian princes had to go door-to-door asking for money.

  11. Iamafan says:

    Let’s do some math!

    At the end of July 2019 (before the Powell speech), the Treasury General Account (TGA) at the Fed was a low 163.763 Billion. (Treasury Cash Holdings was down to 174 million.)

    To raise badly needed Cash, Treasury is going to auction $433 billion till the end of Sept., and another $381 billion from Oct – Dec.
    July to Sept alone is $274 billion higher than the amount they announced on April 2019!

    To help the Treasury auction all that cash, the Fed ended QT abruptly. The $58 billion that TBAC budgetted for redemptions by Sept. is now 0. That SOMA add-on rollover, will reduce the additional money need to “only” $216 billion.

    Ask yourself this question, will the huge auctions reduce the money available for capital market liquidity? Also, who’s buying all these securities? The Primary Dealers already have more than $250 billion of them. So if the foreigners don’t step up to the plate, the dealers HAVE to buy them.

    Question is where are they gonna get the money to buy them? They will have to raise the money in the same capital markets (e.g. Repo). Interesting.

    The pressure for the Fed to do a new round of QE will be inevitable by Sept to December, regardless the Fed Funds Rate.

    Now think about IOER currently at 2.1%
    The Fed will have to pay the banks that interest rate on about $1.5T of bank reserves. That’s about $31.5 billion interest payment. But the Fed earns that money mainly from Treasury interest yield. So if Treasury yields go down, how will the Fed pay the same IOER? There will be pressure to reduce IOER. Maybe at some point, the banks would rather hold Treasuries than Reserves (that has not happened yet since Reserves are more efficient for LCR requirements).

    All of these are happening during a Trade War with gorilla China.
    And, there is no more budget caps. No cuts in spending whatsoever.

    Hold on to your hats.

    • John Taylor says:

      The federal government spends money before issuing debt, essentially using the central bank as a credit line.

      This debt, when issued, will always find a buyer at the right interest rate. When a lot is issued, it pulls money that would have been allocated down the risk scale – corporate debt and junk bonds – raising yields on down the line. That’s what’s called the “crowding out effect” as too much public debt issuance displaces private sector debt causing interest rate spikes and liquidity problems.

      Keep in mind that capital in the modern world is global, and a low-interest-rate world will find higher yields in US assets attractive. Thus the liquidity problems from high government debt issuance end up spreading elsewhere. Emerging markets usually get hit first and hardest – which is pretty visible right now in a number of countries.

      A self-feeding cycle develops of emerging market trouble and relatively higher US interest rates which makes dollar based investments seem more attractive – and the dollar actually strengthens. That’s where we are now.

      If the US stock market begins to go down, I’d expect the flight to safety initially strengthening the dollar as well despite easing by the Federal reserve. Then lows are hit and the next wave of the cycle comes through.

      Right now I think the US Dollar and Gold will both strengthen as the current strength in the S&P eventually wanes and eventually turns (I’m not convinced it turned yet).

      I predict that just like last time gold will hit a cycle high in the next bear market, likely higher than last time because of added central bank liquidity. Perhaps that will last a year or two until the next risk-on trade goes back into bottomed-out stock sectors and emerging markets and it all starts again.

      Investment money will always flow somewhere, it can’t sit long without being invested in something (would you pay an asset manager to sit on dollars?). That’s why these sectors rotate through the way they do, always similar but a bit different than the time before.

    • Rcohn says:

      The Fed has lost huge credibility since Dec. To institute QE without a demonstrable crisis just to manipulate some interest rates would reduce their credibility to almost nothing

      • hadisha says:

        Lol, it lost it 20+ years ago, where you been? Maybe Trumps jawboning is just a means to show the emperor has no clothes.

      • historicus says:

        The Fed (Bernanke) promised that they would normalize when unemployment dipped below 6.5% (WSJ July 2009)
        The promise was for the balance sheet holdings to “roll off” and the balance sheet return to the starting point. (circa 1 Trillion)
        Now the Dow has more than doubled, unemployment is well below 4%, and the yield curve is inverted. If you cant trim the balance sheet now, when can you?
        Its a crime to lie to the government, but when the government (the Fed) lies to you…???

    • Old-school says:

      I read something similar that Powell might have to do QE to provide liquidity in the short term.

      Hussman had an Interesting article that QE can not cause inflation because it is just asset transformation, newly printed cash to purchase bonds. Inflation comes through massive government deficit spending when people start to question if the government is going to pay their debts, then bad stuff happens. He thinks we could be getting pretty close because deficit is so large in good times, and will sky rocket during recession.

      It’s funny in a way that the fear of inflation is gone and governments are trying to get more and we will probably look back and say what were we thinking.

  12. Unamused says:

    “Somebody has got to put a stop to this race to hell.”

    Okay, I’ll bite, just this once, for old time’s sake.

    Have your people talk to my people and we can do lunch. I’ll have the fish ‘n chips.

    Let’s see.

    They can use it on a down payment for all those taxes they’ve evaded.
    They can waste it trying to save civilization from, well, themselves.
    They can blow it at Monte Carlo in a high-stakes round of baccarat. Pass the shoe.

    I have loads of really excellent ideas. Coming up with an adequately snarky punch line, not so much.

  13. Iamafan says:

    Oh, I forgot to add:

    Today’s 3Y auction had a record whopping SOMA add-on (roll-over) of nearly $24.8 billion. This constituted about 39.5% of the total amount accepted for the auction. Now this is happening during what is supposed to be “good” times. If this is not debt monetization, then what is? No need for Negative Rates, just buy your own debt and look good.

  14. ThePetabyte says:

    Slight mistake in the spreadsheet there, India is listed twice at 41 and 42, causing the count to be at 51. Unless you’re heavily hinting that it is a good buy ;)

  15. I’m not Jewish but what happened to Israel on the list?

  16. David Hall says:

    Islamic banks are not allowed to charge interest due to Sharia, but they are allowed to take a percentage of the profits in projects they finance.

    UBS (Switzerland) is charging wealthy depositors fees for holding their money (Bloomberg).

    Low bank interest rates are fueling asset bubbles that are growing faster than inflation rates. There is not as much incentive to put money in the bank.

    If there is ever a crisis again, people deep in debt might feel vulnerable as banks will tighten credit instead of overextend credit. Consumers will be tighter with their money after they lose their jobs. Warren Buffett said something like, “When the tide goes out, you see who has been swimming naked.”

    Yesterday part of the yield curve inverted to a low last seen in 2007.

    • bungee says:

      David Hall,
      Your description of islamic financing sounds like an equity position. Like shareholders in a company. And that seems like a better relationship between lender and borrower. A real stake in the direction and profit of a venture.

    • Petunia says:

      I’ve wanted to comment for some time, but didn’t want to land up in moderation hell, on the Islamic banking model fitting in with a zero interest rate policy. Seems like the western banks can expand their customer base on the way to ZIRP. A potential increase of 100% in potential clients for the countries supporting ZIRP.

      I don’t think the Islamic banking model supports NIRP because it would be considered unfair to take a customer’s money without providing something of equal value in return.

  17. Iamafan says:

    So, if we need 2 down quarters to call a recession, it will have to wait till early 2020. Since you will need another 6 months to say you’re out of one, that puts us right smack in the elections.

    So, I expect a savior to appear around the end of the first half of 2020, so Orangeman will have no time to label him on Tweeter. I expect someone with name recognition and money since there’s little time. Probably not a socialist but a billionaire.

    • daniel weise says:

      Or a Socialist Billionaire,we got plenty of those.

      • MD says:

        So true. So many of these demigods would have been totally eviscerated if it weren’t for the trillions of dollars created out of thin air and pumped into the financial system.

        As it turns out the wealth gap has accelerated greatly.

      • RagnarD says:


  18. Rowen says:

    I wonder how much of the negative bond purchases are for pension funds that must allocate bonds based on target date retirements. And given how aged Europe’s pension fund population is, it would make sense more bond vs equity demand.

    • NBay says:

      Have a chart of aging populations (and projections) for several countries, and it’s all kinda spooky. Not for me (be overjoyed to get 10 more good ones, as is) but for young’uns. Looks like something’s gotta change, bigly.

  19. timbers says:

    If tariffs do as much harm as some think, the Fed will quickly run out of rate cuts and have to reach into it’s tool box of it’s self proclaimed standard, normalized tools. I wonder which one it will reach for first? Will USA finally see NIRP? All the other central banks seem to just L-O-V-E it.

    • Wolf Richter says:


      So far, tariffs have done very little harm, if any, to the US. Prices have not risen one iota as the Fed is still complaining that inflation is too low. So hopefully, we get the tariffs to finally push up prices so that the Fed could quit harping about inflation being too low.

      The impact on China is another story. But the Fed isn’t in charge of the Chinese economy.

      • Winston says:

        “harping about inflation being too low”

        Because their method of calculating it is GARBAGE. Rents have skyrocketed. Medical costs have skyrocketed. Educational costs have skyrocketed. Home costs have skyrocketed.

        “Owners’ equivalent rent” is a GARBAGE measure. The single digit percentage of medical cost weighting doesn’t reflect the actual percentage.

        • Juanfo says:

          Groceries, construction materials, transportation, energy, quality tools. Down here many prices higher.

      • RD Blakeslee says:

        As I understand it, “the other story” is why tariffs are being imposed.

        The aim is to punish China so it will agree to a “level playing field”.

        a lot of uncertainty about the prospects for a peaceful, prosperous outcome for the U.S. and China, I think.

        We’ll see.

      • d says:

        Both sides have supported a national sales tax but not enough to force it.

        the p 45 tariffs can be viewed as a national sales tax on chinese good’s great for American robot factory developers/operators.

        • Wolf Richter says:


          Sort of. But I think it’s closer to a tax on profit margins.

          In the US, sales taxes are tacked on to the posted price after the fact, when you pay, and are paid directly by consumers.

          But a tax on margins, such as a tariff, has to be passed on via higher prices, but this is hard due to competition. And for now, these tariffs have not been passed on. So tariffs are a tax paid by corporate profits of companies in China and the US.

        • Wisdom Seeker says:

          Love to see a careful analysis of the data on actual US tariff revenues!

          Another reason why the US may not be seeing an impact from tariffs is if they’re simply being evaded…

          And China’s mess has much deeper roots than tariffs.

          P.S. If the tariff revenues are high enough, the impact on US agriculture can easily be mitigated, at least temporarily.

        • Wolf Richter says:

          Wisdom Seeker,

          Not a “careful analysis” but at least some basic numbers on the Federal Government receipts from tariffs:

  20. Gorbachev says:

    Things will go on until it can’t.

  21. Rcohn says:

    First it is not correct that no one holds the bonds until maturity. Maybe not today’s trader or hedge but someone.
    The question becomes why would anyone buy a negative yielding bond
    1.TRADERS who may flip it in 5 minutes or 1 day or a week . Their goal is not to buy it for a specific yield , but to sell it to someone at a higher price.
    2 BANKS and FINANCIALLY institutions. They are required to hold a certain amount of designated capital in the form of approved securities. These institutions have no incentive to hold longest term securities that yield negative returns so they will avoid longer term securities
    3. Insurance companies. If they can find low risk securities that match the duration of their products, they will buy longer term securities with negative yields. But remember these negative yields are built into the pricing of their products, so the consumer of their products ultimately will bear the brunt of negative yields.
    4. Investors. This group will make money buying longer term securities with negative yields under 2 circumstances
    A. Deflation.The “real yield” is what really matters, so if an investor can buy a bond with a negative yield less than rate of deflation, he will make money. For example if the annual rate of “deflation” in Germany is %1 while 10 year bonds yield a negative %1/2 , then the investors real return is a plus %1/2.
    The trick to this is while the negative yield on the bond is determined when the investor buys the bond, the rate of “deflation (inflation ) is not. So somehow the investor needs to hedge in a deflation rate that locks in a profit. In the the US there are a number of ways to do so, among them via TIP securities , but I am not aware of any in Euroland which allow an investor to lock in a reasonable profit. Anyone who is aware of a product, please post
    B. Currency collapses. This is a little more complicated. If the Eurozone experiment collapses, its currency will collapse along with it and each currency will revert back to its own currency. How this conversion back to the original currency will happen, I do not know, but I do know that I would much prefer to own bonds backed Germany government than bonds backed by Greece or a number of the other countries. Obviously this will create a chaotic situation

    I would appreciate it if someone could explain in detail exactly how MMT works, because it seems that all major countries are adopting a form of it

    • Wolf Richter says:


      “I would appreciate it if someone could explain in detail exactly how MMT works,…”

      MMT is an economic religion that requires a leap of faith. For people who don’t take that leap of faith and don’t believe in it, MMT is just nonsense. For believers it’s unassailable religion. But I don’t allow discussions of religion of any kind here, including MMT. So if you want a discussion of MMT, you need to go to one of the temples of MMT.

      BTW 1, just because something is terrible (NIRP, QE) doesn’t mean that it needs to be replaced with something even more terrible (MMT).

      BTW 2, I’ve had to block MMT trolls for years. All they do is come around to spread the MMT gospel. It seems someone pays them to do it, just a like a lot of Bitcoin trolls got paid, including McAfee ($100,000 per tweet, if I remember right).

      • Iamafan says:

        If you want a severe headache go listen to the new interview of Prof. S. Kelton on YouTube. This one was not worth my time. It’s easier to convince me to give everyone marijuana and acid rather than believe this craziness. Working hard and paying off our debt is the only solution other than straight out default.

      • Winston says:

        “MMT is an economic religion that requires a leap of faith.”

        ANY economic theory is “a leap of faith” as they are ALL overly simplistic GARBAGE. They don’t call it “The Dismal Science” without reason. It isn’t even a “science.” Attempting to run the world via the artificial manipulation of the price of money inevitably gets us where we are at today.

        • IdahoPotato says:

          Correct. Trickle down is garbage, MMT is just another on the list.

        • NBay says:

          But both are politically much easier replacements/religions for a straightforward Fiscal Policy, E.G., TAXING Schedule adjustments. But then there are way way too many jumbo and super jumbo sized piles of “Hard Earned Money” out there to ever allow even considering that, and that “death tax” is just as evil as it is meant to sound.

    • Cashboy says:

      “A. Deflation.The “real yield” is what really matters, so if an investor can buy a bond with a negative yield less than rate of deflation, he will make money. For example if the annual rate of “deflation” in Germany is %1 while 10 year bonds yield a negative %1/2 , then the investors real return is a plus %1/2.”

      Surely still better to buy no bonds at all and be up 1% ?

      • Bob Smith says:

        I have been wondering the same thing, if cash is a viable option, why would negative yields even exist, other than a slight negative to store your money in a bank? I would think cash provides the floor and why this is so dangerous that things are negative yielding.

  22. Rcohn says:

    I would like to reiterate a definitional aspect of negative rates that are rarely mentioned
    Negative interest rates mean very low rates of return on investment. Low rates of return on capital mean less investment. Less investment means fewer jobs created. Fewer jobs created mean less government revenue and more social unrest. More social unrest mean the extreme political groups on both the left and the right become more influential.

    • timbers says:

      Very interesting. We are drowning in capital but the internets say investment is falling big-time. Btw the definitional you mentioned as not being mentioned, is mentioned over at Naked Capitalism. Negative rates are like government screaming to it’s citizens “Warning! Extreme Danger! Don’t Shop! Don’t spend! Prepare for the Coming Apocalypse! Stay home and hoard money!”

      • Unamused says:

        We are drowning in capital but the internets say investment is falling big-time.

        It’s useful here to resort to the law of diminishing returns: the more you put into it, the less you get out of it, until at last you put something into it and you get nothing out of it. The something you put into it just disappears.

        Negative interest rates tell you that this condition has now been achieved. Unfortunately people aren’t listening.

        Nominally, positive returns tell you the enterprise is succeeding. Conversely, negative returns tell you it is not.

        The practical advice is to stop digging, not to demand a bigger shovel. Path dependencies can be a btch, and this one is systemic.

    • Petunia says:

      Negative interest rates, in theory, promote consumer spending, which in turn increases GDP. At least that’s what they hope NIRP does. Generally, I think it eventually leads to stagnation, and more episodes of Hoarders.

      • RD Blakeslee says:

        hoarders or savers?

        “Hoarders” implies greed, “savers” implies prudence.

        • a reader says:

          Hoarders can imply greed, but under conditions of stagnation it is more likely to be fear.

      • NIRP by implication raises the bond rating, so if it does all this what’s not to like? When I look at those countries with low or negative rates and those with normal or high yields I can see who is who? Zambia or Germany? Then I see the US down the list, closest developed economy, Italy? and I go hmmm??

  23. Old-school says:

    I think about it as a continued slight of hand with money which governments are known to do to ensure they are funded first. There was gold backed money, silver backed money, fiat money with a real interest rate, fiat money with a negative real rate of interest, fiat money with a negative nominal rate of interest, next is probably broken promises on social security and pensions. Government gets the goods and services first and we get a promise to be broken in the future.

    Warren Buffet has the idea that if you own a company with pricing power the currency you get paid in doesn’t matter very much.

    • RD Blakeslee says:

      … and if you own a productive piece of land which supplies you with some of your needs, the price of those supplies in the marketplace doesn’t matter very much.

      • a reader says:

        ‘Yes’ to both you and Old School (with an attribution to the Grifter of Omaha).

  24. MCH says:

    Iceland and China, those two seem nice and stable. Reasonable yields, not part of Europe. Both are pluses. I’m going long Iceland.

  25. Kevin C. Smith says:

    Hey Wolf,
    Slightly off topic, but my wife and I have been here in San Francisco for the better part of a week and it seems dead slow and quiet. That works great for us, but I am wondering if the recession has started but nobody has noticed? Could it be that people are worried and pulling in their horns, at least for the time being?

    • Wolf Richter says:

      The part of SF that I’m in is crowded congested and packed. I don’t see “dead slow and quiet” at all. So I don’t know where you are. But this place is hopping, from what I see.

      • Paul morphy says:

        Russian yield 7.3% looks very appetising.

      • sierra7 says:

        A “country” anecdote:
        Yesterday I went shopping in a medium sized town in the Sierra foothills (about 30m from my home further into those mountains). It was a Tuesday, “senior discount day” and the major supermarket (a large decent chain) was very, very quiet. Many residents are facing increasing property insurance rates if not outright cancellations; future contemplation by boards of supervisors in the communities for “special new fire taxes”; budget cuts that hit the “lowest” services offered by counties. Policies that have given from the state for millions of dollars to renovate old judicial buildings with new but our county roads are falling apart (literally!).
        I have grandchildren in SF working; I have much family in Silicon Valley “goodly” employed; out in the “boonies” it is a bit different.
        This is one of your best articles so far; the more things fall apart the better your writing is getting!

        • Petunia says:

          That’s not as interesting as getting caught in a rainstorm in New Orleans. You can watch the storm drains turn into geysers. It’s both interesting and horrifying.

          BTW, New Orleans got $1B from the feds after Katrina to fix the sewers and the money disappeared, as it does in sanctuary cities. Now Trump wants them to pay the money back.

    • FinePrintGuy says:

      The locals go to bed at 9pm so they can get up at 5 for goat yoga, or whatever.

  26. KPL says:


    Please do also post as to how (and if possible when) this is all going to end. Thanks

    • Heff says:


      And while you’re at it, can you please tell me what lotto numbers to play this weekend. Thanks…

      • RD Blakeslee says:

        … and when global warming will kill all my trees, so I don’t have firewood any more …

        • Wolf Richter says:

          Hahahaha, clearly, I need to get into the predicting-and-forecasting business. There seems to be a lot of demand for it.

        • GirlInOC says:

          and i’ll take housing market predictions for 2,000 Wolf.

          (just not 2,000 realz money, just internet fake money. so bitcoin?)

      • polecat says:

        I’d be happy to send Wolf some fine chicken entrails .. ‘Fed’ Ex even (sans chickens, of course .. as I’ll have to put up those in canned larder for emergencies) .. then he’ll have all the ingredients he needs for his divination rights !

  27. Memento mori says:

    So for a layman like me, this means I would rather have 90 cents in 10 years than one dollar today, right?
    That’s got to be some good stuff whatever they are smoking.

  28. FinePrintGuy says:

    Wolf, don’t forget all the passive index buyers, harnessing the power of collective wisdom and back tested portfolio allocations. Switzerland, Austria, Germany…all have to be included in any g-bond index cause they used to have decent yields, low vol, and a decent enough brand name for fiscal rectitude, right?

  29. Eamonn Harter says:

    I can’t see why anyone would hold a negative bond when you could just have the currency instead, aside from gambling on even lower rates in the future.

    • a reader says:

      Bonds and cash are different things, and so can be treated differently by the financial authorities. Think of the possibilities.

      As for the physical bank notes, some of the denominations can be selectively announced void and null by the issuing authority (you copy, Cash Boy?)

  30. Paulo Zoio says:

    Stocks, bonds, RE, gold, silver, art, antiques, comic books, bitcoin, shitcoin, toilet paper, every single piece of something is in bull market. Everything is in bull market. The piece of toilet paper I bought last month, now values +10%. This can go forever and ever, or till someone realises that all the central banks in the world can’t buy every piece of toilet paper existing in the galaxy and realises that every piece of something that he owns values nothing.

  31. Iamafan says:

    I have a feeling that negative yielding securities are simply carried to positive yielding U.S. ones.

  32. Tim says:

    China is shoveling liquidity into the system “like a drunken sailor on weekend shore-leave.

    Not one of the major central banks is even pretending to move rates back towards normality (= above inflation).

    My own model suggests that reported “growth” in China is fictional, and that the Chinese economy is, at best, flattening out.

    Then we’ve got the surreal context of negative yields.

    ….. and asset prices which look way OTT

    ….. and the Sino-US trade conflict

    ….. and what “Brexit” might do to the UK

    ……and what it’s likely to do to Euro Area economies (n.b. Ireland, France and Holland)

    …….. and EA banks

    So, the $64 trillion dollar question – when’s the crash?

    • Gershon says:

      Don’t forget about Hong Kong. If the Chinese intervene to put down civil unrest, Katie bar the door – that is going to accelerate the arrival of the long-deferred financial reckoning day for China, Hong Kong, and ultimately the global financial system.

      • Gandalf says:

        A Perfect Storm –

        China crushes Hong Kong, a major economic and financial center,

        Latest Brexit Day is Oct 31, with Bojoke ready to drive double decker British bus over the Cliffs of Dover.

        And… India just rescinded autonomy for Kashmir, making Pakistan very very angry, both nuclear armed countries btw

        Iran is creeping closer to building nuclear weapons, Saudi Arabia will almost certainly build its own or buy some from Pakistan in response

        North Korea has been firing off more missiles (nobody is even paying attention to that anymore),

        Japan and South Korea are throwing huge hissy fits at each other,

        And the US just withdrew from the INF Treaty (let’s build more Pershing missiles and neutron bombs again!)

        Turning and turning in the widening gyre
        The falcon cannot hear the falconer;
        Things fall apart; the centre cannot hold;
        Mere anarchy is loosed upon the world

        • MCH says:

          Let’s just go down this list of yours and see what matters.

          >>China crushes Hong Kong, a major economic and financial center,

          No big deal here, just send in the PLA like it was 1989. Seriously, what is anyone going to do, sanction China?

          >>Latest Brexit Day is Oct 31, with Bojoke ready to drive double decker British bus over the Cliffs of Dover.

          I honestly think that this is a trainwreck that happened three years ago when DCam called for a referendum. The Brits just need to suck it up and make a decision. Leave or Stay. Stop wishing for an amicable “we can still be friends” divorce, the husband (EU) can’t afford amicable.

          >>And… India just rescinded autonomy for Kashmir, making Pakistan very very angry, both nuclear armed countries btw

          Really? Didn’t even hear about that from NPR or CNN. So, it mustn’t be that important. Look, they haven’t nuked each other yet, and probably won’t. So, just relax.

          >>Iran is creeping closer to building nuclear weapons, Saudi Arabia will almost certainly build its own or buy some from Pakistan in response

          Seriously, I’m of the opinion that the US should just let them have nukes. Same for the Saudis, in fact, nukes for everyone in the region. I think it’ll actually calm thing down. Because there is nothing like the threat of mutually assured destruction to get people to wake up and see some sense. If they don’t, well, that’s kind of too bad.

          >>North Korea has been firing off more missiles (nobody is even paying attention to that anymore),

          Seriously, that the US paid so much attention to the family of Lil’Kims over the last two decades is ridiculous. Please, NK, have a party, build nukes with ICBMs. Watch Japan and SK do the same. Same deal as the middle east, everyone either calm down, or not. But literally, it’s a mistake to try to stop people killing each other, they either start to see sense or they end up killing each other.

          >>Japan and South Korea are throwing huge hissy fits at each other,

          About what exactly? Again, not on NPR, not a problem. Besides, I already have my iPhone. so, not a problem for me.

          >>And the US just withdrew from the INF Treaty (let’s build more Pershing missiles and neutron bombs again!)

          Uh, ok. Let’s say we both can kill each other 50 times over. I’m going to build enough firepower to kill you 51 times over. Does that seriously make a difference? Sure, that means Moscow can be nuked in 20 minutes instead of 30. Again… so what.

          Not to be blase about all of this. Most of these potential problems have been factored in to some extent. People just don’t care until something happens. When it does, the market will react and adjust, and adjust some more, and eventually, we get equilibrium. Or as Thanos might say: “Perfect balance.”

        • Gandalf says:


          Glad to hear that you are at least not watching Faux News, which has been scientifically proven to make its viewers more stupid.

          I used to watch CNN and NPR, until I realized they only covered the top five or so headlines of the day, with lots of talking heads spinning their take on things to fill in the time. Useless really.

          Top 5 news stories at present?
          1. The Trump Unreality Show
          2. Democrat responses to Trump Unreality Show
          3. Mass shooting(s) du jour
          4. Need to “do something!” about #3
          5. Whatever can fit into the last 30 sec of the news show

          Yep, no room for all that other Not Important Stuff in the Rest of the World. Best to keep your eyes glued to your TV and stay uninformed

        • MCH says:


          I remember a time when news was actually news. I don’t bother watching any of the stuff on US TV any more. The news networks nowadays feel like they’re trying to be reality TV just so they can get eyeballs. I am ambivalent on what is worse, the constant barrage of crap on TV or not knowing any of it at all.

        • NBay says:

          “I remember a time when news was actually news”

          When was that?
          Guess I somehow decided media was always about eyeballs” Silly me.

      • nicko2 says:

        Good for Vancouver RE. Silver lining.

  33. Peter M says:

    Nice list. In order to make the rates comparable, I guess you should have used the local bond in Argentina that yield around 25 pct. Short term rates @55. Pretty sure you’ve got their USD denominated one….

    Keep up the good work..

  34. Gershon says:

    Meanwhile, gold is hitting multiyear highs as the flight to safe haven accelerates in the face of the central bankers’ coordinated push to take us down to road to Weimar 2.0.

  35. oldITguy says:

    Wouldn’t bond convexity explain at least some of the apparent madness of owning negative yielding bonds? Google away, most of the explanations I’ve found have left me with more questions than answers but apparently there is money to be made. Of course, this tends to focus on long term bonds for relatively short periods of their life and seem to work as long as rates continue south…slowly.

  36. Dan says:

    Little boys and girls…throw those Piggy Banks in the trash. Spend, spend, spend to hell.

  37. Unamused says:

    So, the $64 trillion dollar question – when’s the crash?

    2026. No charge.

    You mean the financial crash? That’s happening now.

    Also free.

  38. Scott says:

    As long as the governments of the world embrace negative interest rates and the printing of money, the stock market will go up. It may get bumpy, but I think it still goes up. At some point the scales of sanity will tip and there will be hell to pay.

  39. SocalJim says:

    Nothing to worry about. The low yields is the result of too much capital in the system because of world central banks. Just a supply and demand story. Negative rates will be good for real estate. After the 10 year hits zero, rental properties will be the ticket. Where else will you be able to earn safe and decent returns with inflation protection?

    • Ed says:

      SocalJim – I can’t tell if you are being sarcastic. The ten year yield is a reflection of inflation expectations so dropping yields are a very bad sign for you. The market is betting that property values and rental rates are about to plunge.

      • SocalJim says:

        Ed, except there is so much cash looking for a safe place the 10 year CMT is being suppressed to levels below inflation. This is a symptom of too much money creation by central banks. Furthermore, bank regulations result in banks holding more treasuries than ever. Those two facts mean forget your connection between the 10 year and CPI. In reality, the trade war with China will likely result with higher inflation … does not matter who wins in 2020. The cat is out of the bag and some number jobs will be returned to the US.

  40. WSKJ says:

    I dreamed last night that I had just received a beer mug in the mail from you, Wolf.

    Something of real value, a tangible good, in this global scene of central bankers running amok.

    As usual, thx, Wolf

    • Wolf Richter says:

      Hahaha. Btw, we’re working on the beer mugs. They’re happening. And they’ll have real value: At least you can use them to soothe your pain :-]

      • polecat says:

        Sure, Wolf … if one can STILL afford the beer ! ….

        • NBay says:

          Don’t worry, I’m sure they make still “Night Train” (or it’s equivalent). Serve VERY cold, per instructions on NT label.

  41. Rob says:

    Hi all,

    If you look around the world then it still seems just possible to find “normal” countries with “normal” banks where the depositor is still king.

    Many of these countries seem also to be along the lines of small government and flat taxes and increased personal freedom. Compared with the obvious socialist train wreck of the west I think some of these are worth considering in the light of overpriced western stocks and unsafe western banks.

    I question if these banks (see below) are riskier than in the west. For example Lloyds bank in the UK has a liabilities to assets ratio of 94%. This is at a time of historically (in millenia) low UK interest rates which has blown UK real estate (securing the banks loans) to astronomical levels. House prices in central London are up by a factor of 10 in 20 years (see

    Many of the banks in the higher interest rate countries seem to have mich greater capital cushions (10-20%) secured against real estate with much lower valuation ratios (10% gross yields), in countries with much lower wages and taxes to boot, so should be reasonably stable no?

    TBC Bank (Georgia)
    Liability/Assets 86%
    Inflation rate 4.6%
    Deposit rate 10.2%
    Real yield 5.6%

    Armeria Bank (Armenia)
    Liability/Assets 90%
    Inflation rate 1.7%
    Deposit rate 9%
    Real yield 7.3%

    Atabank (Azerbaijan)
    Liability/Assets 78%
    Inflation rate 2.5%
    Deposit rate 10%
    Real yield 7.5%

    Kyrgyz commerzbank (Kyrgyzstan)
    Liability/Assets 83%
    Inflation rate 0.9%
    Deposit rate 11%
    Real yield 10.1%

    Sudameris bank (Paraguay)
    Liability/Assets 92%
    Inflation rate 3.1%
    Deposit rate 8.3%
    Real yield 5.2%

    Equities wise, Russia looks like a screaming bargain, if we don’t get prevented by some kind of sanctions soon. Already many banks (such as the US) cannot send a simple SWIFT transfer with Russia even as an intermediate bank.

    Escape the investment “walled garden” theft of the west while you still can!

  42. Eamonn Harter says:

    Negative interest rates are one reason for the push to abolish physical currency. You can thank the evil trolls at the IMF for promoting this bizarre act of desperation.

  43. Unamused says:

    If you look around the world then it still seems just possible to find “normal” countries with “normal” banks where the depositor is still king.

    Japan Post Bank comes to mind. For decades it was run essentially as a utility, as all banks should be required to operate. Primarily a savings institution, it is believed to be the world’s biggest deposit holder.

    Mr. Richter certainly knows more. Perhaps in some future post he can describe it’s relative stability, if only to provide some contrast to frenetic nature of the rest of the global banking system.

    • Unamused says:

      If you look around the world then it still seems just possible to find “normal” countries with “normal” banks where the depositor is still king.

      Japan Post Bank comes to mind. For decades it was run essentially as a utility, as all banks should be required to operate. Primarily a savings institution, it is believed to be the world’s biggest deposit holder.

      Mr. Richter certainly knows more. Perhaps in some future post he can describe it’s relative stability, if only to provide some contrast to frenetic nature of the rest of the global banking system.

  44. Cashboy says:

    I think that I have some kind of brain deficiency because:

    I cannot understand how anyone would invest in something that gives you a negative return on capital especially if there is a chance that you don’t even get your capital back. that is how I looked at corporate and government bonds.
    I did not invest in shares because the PE ratios seem crazy ( I was taught as a trainee chartered accountant in the 80’s that anything with a PE of 13 or more is a dumb investment).
    I avoided buying any assets believing they were overvalued and that I would have an opportunity to buy when the economy crashes and there would then be some bargains to be had.

    I have made some serious investment errors over the last 8 years as a result:
    I have held no bonds and no shares.
    I invested 10% in gold and 90% in Swiss Francs with a zero interest rate in a Bangkok Bank (thought that would be safer than the GB pound, Euro and even US Dollar.
    I have kept these out of the west because I was worried about capital controls and even a tax on capital being implemented in the UK and EC.

  45. Cashboy says:

    I don’t know why the Zimbabwe economy is doing so badly.
    I thought they were ahead of the game as they started QE (Money Printing) well before the west started.
    I remember Robert Mugabe stating that it was interesting that the USA and Europe was following his economic policies.
    Ha Ha Ha.

  46. lobo lógico says:

    $15 trillion is chicken feed, what about the global exposure for $1.5 quadrillion in derivatives — and Deutsche Bank screwing around with $49 trillion notional in dumbass bets? Where the wheel of stupidity stops is nobody’s guess ….

  47. Ed says:

    Hey Wolf – Remember when the 10 year yield was above 2% and you wrote a whole article about how it was going back up to 3%? Being a contrarian isn’t always so clever is it. Actually, being a contrarian/bear means your going to look like a genius about once every 10-20 years.

    • Wolf Richter says:


      You’re confused. The 10-year yield going back toward 3% was a BULLISH scenario for the economy – that the economy would not dive into a recession, and once markets figured that out, they would start selling the 10-year, and yields would snap back. That was the scenario.

      Same thing happened in 2016, when the 10-year yield snapped back from 1.35% by over a full percentage point in a few months because markets figured out that the economy would be just fine. And it was.

      But your bet, saying the 10-year will go lower, is being BEARISH about the economy, predicting some kind of collapse.

      So YOU are bearish.

      I’ve been fairly bullish about the economy all year: weak manufacturing but strong where it matters the most: services and consumers. That has been my song and dance. That’s what the data sez. And for now (until the data changes), I’m sticking to it.

  48. Iamafan says:

    Today’s 10 year Treasury Note Auction:
    The amount of Fed Roll-over (SOMA add-on) was a whopping $17.62 billion, the largest ever in 10 year term.
    That was 39.5% of total accepted.
    More monetization happening. Is this the beginning of the end?
    Real QE is coming when the roll-overs are not enough.

  49. Anon1970 says:

    If you own shares in a bond fund as part of your investments, do you know what is in the fund? Were you “sold” the investment by a wealth manager or did you buy it after doing your own research? I suspect that a lot of bond fund owners have no idea what is in their fund.

    Just before the Great Recession, one of my neighbors invested in range notes, on the advice of his “wealth manager”, notes which were backed by Lehman Brothers. He lost some $40,000 when Lehman collapsed. His broker did not work at Lehman Brothers, but at a larger competitor that is still in business.

    For the time being, you can still earn a positive yield on a money market fund offered by low cost mutual funds or in a Federally insured savings account offered by many banks. For many of you. it is probably the best place for your money these days.

  50. no sugar says:

    trump deficit will destroy America. He’s playing a leverage game pushing up the deficit by trillions and then demanding the Fed lower rates — placing the blame on everyone, with a strategy that has placed him in bankruptcy at least 5 times!!!!!

    In 1952, $3.42 of GDP was generated for every dollar of business debt, compared with only $1.39 in 2017. In the corporate sector, where capital as well as technology is most readily available, GDP generated per dollar of debt fell from $4.50 in 1952 to $2.50 in 2007 to $2.21 last year. The dismal trend in productivity confirms this conclusion. The percent change for productivity in the last five years (2017-2012) was equal to the lowest of all five-year spans since 1952. It was also less than half the average growth over that period.

  51. Tom Saunders says:

    As a family we have been dealing with lower interest rates for decades. We used to get at least 8% to 9% on GIC’s in the early to mid 90’s and then 7%, 6%, 5%, 4%, 3% and maybe 2% soon.

    We have a family business that we were thinking about keep it open making last year net profit of $200,000 but we don’t see any point anymore. There is no more reward to keep investing, saving and we want to stop being on the hamster wheel.

    Just to point something out that may have been posted but I don’t know for sure, bank dividend yields are not crashing as they are staying elevated at 4.2% to 4.5%. This is about 6 major Canadian banks I’m talking about. It just seems to me this is world major banks helping each other purposely pushing down bond rates to force people into their more leveraged, riskier stocks.

    The whole world is becoming a socialist cesspool. I am saddened and feel sorry for future generations as all this crisis and turmoil they are creating will eventually create another world war that will make WWI, WWII look like a joke.

  52. ooe says:

    It shows the failure of economic politicy in the Euro zone. the politicians should increase spending to put idle resources to work. Also, it shows there is nothing to invert in the Eurozone.

  53. KG says:

    If the layperson understood this, they would realize that Brexit is not some outrageous, foolish rebellion but a precursor to the shrinking of the globalist, socialist system that will knock many powerful people off their perch and will create havoc across the Eurozone and emerging markets.

    Germany and Switzerland top the list because smart money is betting that they will get Swiss Francs or Deutsche Marks in return. The rest of the buyers are simply keeping a ponzi scheme alive because their entire careers and fortunes depend on it.

  54. Frank Klevenhaus says:

    A study recently published by Danish Nationalbank suggests that low rates is caused by demographic issues combined with monetary policy. It has been going on since middle of the 1990s

    Go to the pdf file.

    • Wolf Richter says:

      Frank Klevenhaus,

      There is a difference between “low” rates — say a 3-month yield of 3% — and NEGATIVE rates. The Danish Nationalbank is one of the worst, when it comes to interest rate repression, with its policy rate of negative -0.65% for the past several years. They could raise that rate to +2.5%, and those negative rates would disappear in a hurry. These folks are just trying to rationalize their fiasco policies.

  55. Robert says:

    The bankers’ biggest wet dream- getting you to pay them interest on your savings instead of vice versa- has come true with cloying support from the Flounders* of the MSM press, the latest being Joe Weisenthal, 8/8/19 at Bloomberg: “The Non-Weirdness of Negative Interest Rates
    Savers in Europe are having to pay to store their wealth. That’s not so crazy when saving is all too plentiful.” Or two days ago, Rupert Neate at The Guardian: ” “Conditions in money and capital markets remain very challenging,” UBS said. “Interest rates are lower than expected, remaining in negative territory. We assume that this period of low interest rates will last even longer and that banks will continue to have to pay negative interest rates on customer deposits at central banks”[ did you get that- “Banks will continue to pay negative interest rates” (the perfect defense for bank robbery: “This isn’t a stick-up, this is a personal bail-in.”
    Now, it might make sense to pay a banker to store your gold (that is, after all how banking got started, the vault of the goldsmith), but digital keystrokes where all is lost if the banker- let’s say Mr. Lehman- goes broke, is another matter. And the concept that someone has a right to expect some compensation for his deferred gratification means that the huge sucking sound that H. Ross Perot associated with jobs fleeing the U.S. under NAFTA could as well apply if some honest banker actually offered to pay savers interest (especially considering he regards charging cardholders 15+% APR perfectly normal.)
    *FLOUNDERS(from the Urban Dictionary): Reporters with two good eyes, apparently on the same side of their head, which provides an excuse for not reporting what is happening on the bottom.)

  56. historicus says:

    Who empowers the Central Bankers?
    Who benefits the most from Negative Rates?
    Same answer. (governments)
    Negative rates erase the ill effects of government debt and turns the mess into an interest bearing asset. Shazam!
    And now it comes to the US, and alleged “free marketers” such as Kudlow and Moore question why interest rates at all.
    But to a larger point.
    Is not Central Banking and Planning a Socialist exercise? Making economic decisions by committee rings familiar. And are not the negative rates a response to failed socialist economies in Europe?
    Socialism via the backdoor comes to the US and drags with it negative interest rates and the notion of “why any interest” for lenders?

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