The cost of servicing Japanese government debt used to be famously low. So famous, in fact, that falling bond yields (the common measure of how costly it is for a government to issue debt) is called “Japanification.”
But Germany is now giving Japan a run for its money: Europe’s biggest economy just saw its very long-term bond yields drop to an even lower level. Japan’s 30-year yields ended trading Tuesday with a yield of 1.168%. Germany’s 30-year yields dropped as low as 1.137% today.
Here’s what it looks like:
It’s only the second time in history this has happened. Japan’s yields are falling too, but its downward spiral has been a lot slower. Germany’s 30-year bonds yielded about twice as much as Japan’s as recently as the beginning of 2008. The yields crossed over in June 2012, when the spectre of a eurozone breakup was still haunting the continent.
Since September, Germany’s six-month-, one year-, two-, four- and five-year bonds have all plunged into negative yield territory. That means the investors are effectively paying for the privilege of holding onto the German government’s debts.
French, Dutch, Austrian, Belgian, and Finnish 10-year yields hit record lows today too, according to Twitter’s Fabrizio Goria.
Japan used to be a strange creature in bond markets. Incredibly low yields separated it from the world’s other large, advanced economies. That isn’t the case any more. Japan also used to stand out because of its low inflation, but at 0.1%, Germany’s price growth is even lower than Japan’s.