The phenomenon — where issuers are getting paid to borrow — was once viewed as an abnormality, but is quickly becoming mainstream. As it stands right now, bonds with negative interest rates attached to them are showing no signs of losing momentum.
Fels paints his thesis of negative-yielding debt within the US around three key cyclical drivers that are pushing lower the natural rate of interest — or the rate that supports full employment and maximum economic output, while keeping inflation at bay. "With the U.S. labor market cooling off, households are likely to increase precautionary saving in the period ahead, thus adding to the demographically induced saving glut," he added.Fels thinks the latest round of 10% tariffs on $300 billion worth of Chinese goods"raises uncertainty and is likely to induce companies to postpone or slash investment spending further, thus reducing the demand for investable funds.