Bloomberg, June 27, 2019: ‘Interest rates’ may be a thing of the past
In the year 2117 Austria will very nearly be beachfront property, and one of its 100-year government bonds will mature. During that time, investors (and/or their descendants and/or their brains downloaded into robots) who bought a reissue of the bond this week will enjoy a whopping yield of … 1.17% per year.
Though that is less than euro-area inflation, this bond issue was in hot demand, writes Marcus Ashworth. This is the latest example of what we described earlier this week as a desperate scramble for yield in a world where central banks are pushing interest rates toward zero … and below.
In fact, nearly 40% of the world’s government bonds yield less than zero, notes David Fickling – meaning you pay for the privilege of lending these governments money. Due to bond-market sorcery this makes sense for some investors, though David notes they may get a similar total return from gold, which helps explain the shiny stuff’s recent popularity. So maybe it’s not a sign of impending apocalypse.
