Yesterday marked the sale of 30-year German bonds with negative yields. Yes exactly. You can now pay for the privilege of lending money to Germany for 30 years. The 30-year bonds offered yesterday during the sale of EU2b were valued at -0.15% in the gray market.
Who wants a negative bond yield?
So who would buy negative-yield bonds? Thus, a US dollar investor willing to invest in Europe can achieve about 2.60% return, which is still a 0.60% premium over 30-year US bonds. Of course, there is the added risk of a long maturity period, which is a high price to pay, given current market conditions.
This marks a key moment in bond prices, and you have to wonder how much lower yield can get from here. They can continue as people continue to buy and if the ECB starts QE again, the German debt purchased, including the 30-year bond, will be lost. Finally, to join the Bundesbank portfolio due to existing QE reinvestments. The bond race continues.
There is still room to recover the shares
If interest rates continue to fall all over the world, then companies can borrow money cheaply, which should sustain a stock rally. If some of the risks can be eliminated from the market, we successfully pass Brexit, things in Italy calm down, the US-China deal is finally being concluded (probably next year, since this is a useful battle for Trump since the start of the election) , then the stocks have a great chance of a rise. Interesting times …
In the meantime, are there any 30-year bonds willing?
Trader Aleksandar Kumanov