German bonds yields have been collapsing all year, and now investors are paying the government to take their money for up to four years.
On Friday, German bond yields hit new lows, with the 10-year German bond yield, referred to as the “bund,” hitting a new record low of 0.623%, while the 4-year yield turned negative, falling to -0.008%.
All German bonds with durations shorter than 4-years are also in negative territory. This means that out to four years, investors are effectively paying the German government to take their money.
The 10-year bund yield compares to a roughly 2.1% for the US 10-year yield, which was pushing to new lows on Friday.
The big story in markets has been the declining price of oil, but the decline in government bond yields around the world cannot be ignored. Across Europe, government bond yields are low as inflation keeps declining and growth appears anemic in the eurozone.
In an interview with CNBC last month, DoubleLine’s Jeff Gundlach said in reference to the low yields across Europe: “It’s a sad state.”