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Band Dhara Ranasinghe
LONDON, April 1 (Reuters) – Less than a quarter of eurozone sovereign debt is now carrying yields below zero, according to data released by Tradeweb on Friday, in the latest sign that an era of negative-yielding debt in the single-currency bloc could come to an end.
Yields on government bonds in the euro zone jumped in March, ending the month with their biggest monthly increases in years, as investors worried about record inflation and braced for interest rates higher in the coming months.
Earlier this week, two-year bond yields in Germany, France and the Netherlands rose above 0% for the first time since 2014.
According to Tradeweb, the value of negative-yielding euro-denominated government debt on its bond trading platform stood at 2.07 trillion euros ($2.29 trillion) at the end of March, up from 3. 59 trillion euros at the end of February.
That represented around 23.4% of a total eurozone government bond market worth around 8.85 trillion euros on the Tradeweb platform, up from nearly 40% a month earlier.
This was the lowest share since at least 2016 when Tradeweb started compiling the data.
The latest figures show how quickly sovereign bond yields are breaking out of negative yield territory as investors feel the end is in sight of the European Central Bank’s experiment with negative interest rates.
Friday’s data showed eurozone inflation jumped to 7.5% in March, hitting a record high.
“The pace at which policymakers might exit negative interest rates varies, but we know it’s happening now,” said Jan von Gerich, chief analyst at Nordea.
“Given the environment in which we have been for several years in the euro zone, the revaluation has taken place very quickly.”
German and French 2-year bond yields were trading just below 0% DE2YT=RR, FR2YT=RR Friday, and together with Portugal, they are the only eurozone yields of this maturity to have yields below zero.
The ECB deposit rate is at -0.5% and money markets are betting that it will exceed 0% in the coming months, with almost 60 basis points of total price increases by the end of the month. the year IRPR.
The Eurozone, Switzerland, Denmark and Japan all have negative interest rates.
When bond yields are below 0%, investors stand to lose money if they hold the bond to maturity.
And while negative yields are good news for governments or corporations that can finance borrowing at extremely low interest rates, they have hurt savers and banks alike.
The pool of negative-yielding, euro-denominated, investment-grade corporate bonds meanwhile shrank to just over 9% of a total market worth around 3.6 trillion euros at the end of March, according to data from Tradeweb. It was the lowest share since mid-2020, at the height of the pandemic, and down from 11% a month earlier.
Euro debt pool with negative yield less than 25% of total https://tmsnrt.rs/3olp2fX
Negative vs positive bond yields around the worldhttps://tmsnrt.rs/3IVTsvN
(Reporting by Dhara Ranasinghe; editing by Yoruk Bahceli and Subhranshu Sahu)
((Dhara.Ranasinghe@thomsonreuters.com; +442075422684;))
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