Over the past two years we explained how in a time of ubiquitous central bank debt monetization, the amount of global sovereign bonds available for purchase – when taking into account CB purchases – has been declining at an ever faster pace, leading to a collapse in liquidity (something the TBAC warned about in the summer of 2013, leading to the Fed’s taper and subsequent temporary halt of QE3), and – naturally – to soaring bond prices (and plunging yields). The latter has reached epic proportions recently, and resulted in $3.6 trillion in global government debt, 16% of total, that is now trading at negative yields.
But not even we had any idea just how bad it really would get.
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Recall that many had touted 2015 as the year when the global “recovery”, originally scheduled for the first half of 2013, would finally kick in. In fact it was said that this would be the year of central bank “renormalization.”
And one look at the Morgan Stanley chart below showing the net issuance of government debt in 2015, which will not only be the lowest in history, but – for the first time ever – be negative, explains all one needs to know.
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Said otherwise, for the first time ever, “developed” central banks are now monetizing more than 100% of global sovereign debt issuance!
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We show this chart just in case there is still any confusion who is buying all the government debt and forcing bond yields ever lower, why $3.6 trillion in global debt is trading at negative yields, and why much more sovereign debt will very soon also reside in the terminal twilight zone of interest-bearing securities.