Negative Rates Series: Negative yield universe shrinks by a trillion dollar
According to the latest figure from the rating agency Fitch, the size of the negative yielding bonds market stands at $10.9 trillion. As some longer dated bonds, move in the positive territory, especially in Japan, the negative bond universe shrank by a trillion dollar since late June. The economic outcome post-Brexit referendum has turned out to be much better than expected and the focus shifted from a relatively faster rate hike from the Federal Reserve and these could have contributed to the shrinkage. The biggest shrinkage took place in Japanese bond market, where the size of the negatively yielding debt currently stands at $6.9 trillion, down a trillion dollar from June. Japan is still the biggest contributor in negatively yielding debt, followed by France ($1.1 trillion), and Germany ($1 trillion). In Switzerland, which enjoys the lowest yield in the world, 95 percent of the outstanding debt is trading in negative.
Fitch has repeatedly warned about the risks of this gigantic negative yielding universe. It said in the past that investors would be facing around $4 trillion in potential losses if the yield moves to the levels seen in 2011. The agency in its latest report warns that the investors could be sitting on a less annual income of $500 billion compared to 2011 and that is due to lower yields.