Looking for Positive Yields? Head to the US

In the world of of ZIRP/NIRP it is becoming more and more difficult for investors to find positive yielding government debt. The world is quickly approaching a situation where one of out every two government bonds has a negative yield. As of 7/7/16, only 57% of developed world government debt has a positive yield. And the vast majority of that debt has been issued by the US government.

The US makes up about 37% of the total developed world government bond, however, it accounts for over 60% of the total positive yielding debt. No other developed world country accounts for even 10%. The UK has the second largest amount of positive yielding debt outstanding at 9% while it accounts for just 7% of the total government debt market. The rest of Europe makes up just 18% of the total positive yielding debt.

On the other side of the spectrum you have Japan. Japan accounts for about 28% of the total developed world government debt stock. However, it makes up over 56% of the total negative yielding debt in the developed world. France’s share of negative yielding debt is twice its share of the total debt market. France makes up 5.6% of the all government debt but 10.5% of the negative yielding debt. Same goes for Germany. Germany makes up 3.9% of all developed world government debt but 8.1% of the negative yielding debt.

Switzerland made some headlines last week as its entire yield curve, from 1-month to 30-years, has moved negative. While this is extraordinary, the impact for investors is tiny. Switzerland makes up just 0.2% of the developed world government debt market.

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Source: Bloomberg, Gavekal Capital

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