The global amount of negative-yielding government bonds fell to $10.9 trillion on September 12 from its recent peak of about $11.7 trillion in late June after Japanese debt yields rose in recent months, Fitch Ratings said on Wednesday. Japan still accounted for 63 percent of the total sovereign debt in negative yield territory, but the amount of Japanese government bonds (JGBs) trading at negative yields fell by $1.0 trillion from June 27 to $6.9 trillion.
Since late July, the yield on JGBs that mature in 15 years has climbed above zero percent on expectations of more fiscal and monetary stimuli, while that on JGBs that mature in 10 years or sooner has remained in negative territory, according to Reuters data. On Wednesday, the Bank of Japan changed its policy stance, which includes targeting the 10-year JGB yield at zero percent and allowing inflation to overshoot its 2 percent goal. Fitch's Chief Economist Brian Coulton said the move could result in a further reduction in the amount of negative-yielding JGBs.
"This means that there will probably be fewer purchases at all maturities (compared to the previous policy of expanding the balance sheet by a fixed amount per year) which could see yields rise at maturities shorter than 10 years. Currently 3, and 7 year JGB yields are materially below zero," Coulton said in a statement. France, Germany, and Italy are the next largest contributors to the pool of global negative yielding sovereign debt with $1.1 trillion, $1.0 trillion, and $0.5 trillion in negative yielding debt, respectively, Fitch said.
The amount of negative yielding debt in Europe of about $4 trillion was above June 27 levels, despite a recent $0.2 trillion decline since August 2, the rating agency said. The Bank of Japan and the European Central Bank's adoption of negative rate policies and their heavy bond purchases in an effort to stimulate their sluggish economies have pushed global sovereign yields to record-low levels this year. The weighted average sovereign yields for the 14 countries with negative-yielding debt hovered at all-time lows, it said.
The aggregate yield to maturity for these countries' government debt is positive 3 basis points, compared with the average yield of 84 basis points on $38 trillion in investment-grade sovereign debt from 34 countries, Fitch said. The yield declines on this investment-grade sovereign debt are costing investors nearly $500 billion annually compared with 2011, it said. The median 10-year yields on investment-grade sovereign securities are 263 basis points lower than they were five years ago.