“Toto, I’ve a feeling we’re not in Kansas anymore” … As we look around the fixed income landscape today, we can get some idea of how Dorothy felt. In the JP Morgan Government Bond Index, which encompasses the 13 largest government bond markets, an extraordinary 30% of sovereign debt, or USD 6.8 trillion, has a negative yield. Even more alarming is that 73% of Japanese government bonds and 47% of European Union government bonds are negative yielding. Both Japan and Germany have negative yields to maturities over 10 years. In fact, only four countries in the index, Canada, Australia and the UK, have no negative yielding government bonds. We believe that the future actions of central banks hold the key. In this report we explain why bond yields will remain low as long as large-scale asset purchase programs continue to hold back the available supply of US Treasuries. (VIEW LINK). By James Alexander, Co-Head of Global Fixed Income and Head of Australian Fixed Income and Vladimir Kazakov, Quantitative Analyst.


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