Let’s be clear what this means: one implication is that the savings glut of big business is being invested at negative interest rates. The managers of these companies are so bereft of ideas they will pay governments to take cash off their hands. If that isn’t a definition of management failure I am not sure what is.
But what I also hear is that the demand for high quality collateral in some sectors is now so high because of Basel (in particular) that the price of government bonds does not matter: what is important is that there be enough of them.
In other words, people want more debt than governments are willing to supply. Which is quite astonishing, because the question that is then begged is why when this is the case and when people so obviously need the services that government can deliver that sufficient debt cannot be created by government running deficits?
We’d need to see proof that it is in fact corporate purchases which is driving the two year bond rate into negative territory. No idea myself but I’d rather not take Ritchie’s assumption that it is. From what I understand, little as I admit that is, government bonds are held by banks, central banks and pension and insurance funds. The corporate qua corporate holdings are negligible.
However, he’s still missing the entire point of QE. Which is to drive down the yields on safe debt so as to move people out along the risk curve. We are deliberately lowering those yields. Thus they are not a sign that we should be issuing more such debt: because that would just raise the yields again undoing the very thing we’re trying to achieve with QE.