The Japan Bond Trading Company's computers were idle on Tuesday. Not due to a breakdown or a strike, but simply because no purchase or sale requests have been received J bond at 10 years. No one has knocked on the terminals of the company which, on behalf of the Tokyo Treasury, manages operations on the second largest public debt on the planet. It is the most clamorous and disconcerting confirmation of the climate that reigns on the front of debt securities, plummeted to the bottom: nobody buys, but nobody sells. Partly out of fear, partly so as not to miss any rebound in stocks. And so, as happened with the Japanese XNUMX-year bond, yields fall even further below zero.
The phenomenon is widespread almost everywhere, even if the extreme peaks concern, in addition to Japan, securities of the Eurozone, at least those of the North: more than 16.500 billion bonds issued by advanced countries today trade below zero, a sharp rise compared to the 12 trillion dollars in December. A nasty surprise for those who had bet that, thanks to the increase in inflation and the hunger for funds on the part of governments to finance the recovery, the rate hand would soon start to rise again. By contrast, Richard Clarida, the Fed's policy strategist, sees an initial rate hike only in 2023, as central banks, including the Bank of England, are hesitant to curtail market buying. Meanwhile, the recovery seems to be faltering and Joe Biden is struggling to get the long-awaited infrastructure plan off the ground.
The result is that managers, faced with so much uncertainty, park the subscriber liquidity, the result of the anti-Covid -19 measures, in the safe havens of sovereign bonds, with paradoxical effects. By now the XNUMX-year German Bund, a benchmark in the Eurozone, trades at -0,5032%, the lowest since January. But the entire Berlin yield curve, including the thirty-year curve, is in negative territory. Same script for the France, negative up to the emissions of 2033 or for Spain, with the ten-year below zero.
even Italy and Greece, the two taillights of the Eurozone, participate in the phenomenon: to have even the slightest interest, one must turn to seven-year emissions. The 0,532-year Italian Treasury, so popular with managers for its positive yield, traded at 87% this morning. But until when will Mario Draghi pay something against the "pleasure" of investing in the debt of the Italian Republic, so snubbed by the markets at the time of the Greek crisis? The answer is simple: certainly as long as the ECB takes on, as is already the case in Japan, the burden of subscribing a large part of the bonds issued by governments, something like XNUMX billion purchased in July alone.
But part of the answer lies in Washington, where the Treasury has so far vehemently rejected the very idea of negative rates. But until when? After Clarida's words, the yields of the T bonds have risen to 1,187% from the minimum of 1,12%, however the bogeyman of zero rates remains close. Last Tuesday, the black day of sovereign bonds, the Treasury department, in order to support prices, announced that in November it will issue something less than the 126 billion dollars at auction, an unusual warning, the first in five years. In short, waiting for the rise in US rates in 16 months, it is increasingly difficult for central banks to place bonds at current prices, in the name of "financial repression" destined to work only if the engine of the stock market is fueled by petrol from the growth.
In this frame, the residue bot people he is destined to be orphaned of his favorite instrument. You can find some palliatives (see inflation-linked emissions) or hope for a reawakening of the real estate market (not easy in a country with demographics towards zero). Or suggest to the executive the creation of controlled risk instruments (at the price of low returns) perhaps through tax incentives. Stay the alternative of China, the only one offering a rate above 3% or emerging markets. But the "good" ones, like Peru, can afford to launch 100-year emissions. Argentina? Leave her alone.
