Pimco warned about balloon in negative yield bonds

Noam Stiekema

Pimco warned about balloon in negative yield bonds, caused by the excess supply of government bonds with negative return in Europe and Japan. Pacific Investment Management Co (Pimco) is warned that investors should pay the governments from Spain to Switzerland to take their money. “Indeed, the balloon is in some of these returns, these negative […]

Pimco Mark Kiesel

Pimco Mark KieselPimco warned about balloon in negative yield bonds, caused by the excess supply of government bonds with negative return in Europe and Japan. Pacific Investment Management Co (Pimco) is warned that investors should pay the governments from Spain to Switzerland to take their money.

“Indeed, the balloon is in some of these returns, these negative returns. I do not think they are sustainable”, said the chief investment director of Pimco Mark Kiesel.

Although this year the concept of bonds with a negative yield has become very popular, it is unusual from a historical perspective. From September 2014 the volume of European bonds traded at metatrader platform charged investors that own them, tripled to 2.8 trillion EUR, according to Bank of America Corp report. This volume of bonds with a negative yield is nearly twice as corporate debt with high credit rating, which is in circulation in Europe, and is nearly nine times larger than the amount of high-quality bond market on the continent, calculated by Bank of America .

The central bankers and politicians from Europe to Japan trying to spark inflation by encouraging investors to buy riskier debt, to avoid losses from holding money in the form of deposits at banks or safer government securities. If their efforts are successful, central banks will most likely abandon expansionary course, which yields would rise and bonds will become cheaper.

“The mission of monetary policy around the world to return inflation. Inflation risk is underestimated”, said also Mark Kiesel

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