But again, this is not true. As the FT again reports, the stock of negative-yielding bonds in the world is growing again, and has now reached US$16trn, only $2trn short of its peak. All German state debt now trades at negative yields. Japan is back in negative rates for some of its debt, and so too are France, Spain, Italy and even Greece with regard to their shorter-dated debt. Those buying this debt know they will make a loss from doing so, and buy it nonetheless.
Governments – or their central banks – own a very large portion of those bonds. It’s not, therefore, a market price – reasoning from a manipulated price is an error.
Plus, of course, these are nominal interest rates. It is real interest rates that matter. And thinking that we’re anywhere near a peak of bonds carrying negative real interest rates is to ignore most of the past century. For if real interest rates had been positive over the past century then holders of gilts now would have the same real value they did when they bought them in 1921. Which is something rather famously not so – as the P³ reminds us from time to time those debt burdens were inflated away, weren’t they?