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Global reflation Series: Negative bond universe shrinks amid spike in German regional inflation readings

According to data released today, inflation has picked up a further pace in January according to preliminary readings from different regions in Germany. German region of Saxony reported inflation of 2.3 percent, while inflation in Bavaria and Brandenburg remain unchanged at 1.7 percent. Inflation in Hesse rose to 2.4 percent in January from 1.9 percent in December. The country level reading will be published at 13:00 GMT, today.  As of now, the policymakers at the European Central Bank (ECB) not convinced that the recent rise would be sustainable.

Nevertheless, the rise in inflation globally and the election of Donald Trump have prompted investors to reduce their exposures to the fixed income, pushing yields higher. The negative rates universe (bonds trading at negative yields) shrank by almost $4 trillion in past four months and currently at $9.6 trillion. Largely, the Japanese and the Eurozone sovereign bonds make up the most of these negative yielding instruments. According to the data from Tradeweb, $514 million worth of Euro-denominated corporate bonds are trading at a negative yield, down more than $400 million from September last year.

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