Home German Bonds Nosedive Towards The Negative Territory
News

German Bonds Nosedive Towards The Negative Territory

Ali Raza

As German bonds offer little positive yields, they may soon sink into the negative yielding territory and this poses a major threat to the market.

Germany’s 30 year yields are on the brink of moving into the negative territory, a turn of events that would be the first among all the major bond markets. The fate of the bonds hangs precariously in the hands of an already volatile market. In the position they are in, it would not take much to send the German bonds into the negative. Growth in political risk in Italy or further deterioration of trade relations between the United States and China, for example, would further erode the bonds and push them into negative territory.

Of the 57 conventional securities in the German market, only six are still offering some sort of positive yields. This shows just how much the bonds have deteriorated. All of the 6 that are still offering some positive yields are due for maturity in no less than 20 years. Germany’s 30 year yields are currently providing a yield of 0.25%. This number is the lowest ever recorded for 30 year yields. For comparison purposes, Italy’s 30 year yields are providing over 3% yield and the United States’ are providing sitting around the 2.5% mark. This shows just how small the German yields have become and the closer they are to the zero marks, the sooner they will fall into negative territory.

What does it mean for the market?

If the German bonds fall into the negative yields territory, it will have a major impact across the board. Bodies that require high credit ratings to function may be forced to buy negative yielding bonds for them to remain in business. Pension funds and insurers are examples of such bodies that may have to trade in negative yielding bonds.

Other traders may be forced to move into other markets in a bid to find positive yielding bonds to trade with. Risky markets such as Italy’s may become one of the few options for traders seeking positive yielding bonds. This will also mean there will be fewer traders chasing after German bonds and this will come with its own adverse effects.

The country itself might be forced to increase its fiscal expenditure if the bonds go into negative territory. This might pose its own problems with the European Central Bank (ECB) which has been, in recent times, seeking to tighten the regulations around fiscal spending. The bank has been vocal about preventing countries from overspending in its fiscal expenditure and if Germany has to increase its expenditure, there might be friction between the nation and the ECB.

The leaning of German bonds towards the negative territory may have serious effects on the country’s economy. The effects of it will be felt across Europe’s economies and there might develop a need to turn to drastic measures to mitigate rate effects that will come with negative yielding bonds.

Trusted & Regulated Stock & CFD Brokers

Rating

What we like

  • 0% Fees on Stocks
  • 5000+ Stocks, ETFs and other Markets
  • Accepts Paypal Deposits

Min Deposit

$200

Charge per Trade

Zero Commission on real stocks

Rating

64 traders signed up today

Visit Now

67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

Available Assets

  • Total Number of Stocks & Shares5000+
  • US Stocks
  • German Stocks
  • UK Stocks
  • European
  • ETF Stocks
  • IPO
  • Funds
  • Bonds
  • Options
  • Futures
  • CFDs
  • Crypto

Charge per Trade

  • FTSE 100 Zero Commission
  • NASDAQ Zero Commission
  • DAX Zero Commission
  • Facebook Zero Commission
  • Alphabet Zero Commission
  • Tesla Zero Commission
  • Apple Zero Commission
  • Microsoft Zero Commission

Deposit Method

  • Wire Transfer
  • Credit Cards
  • Bank Account
  • Paypall
  • Skrill
  • Neteller

Rating

What we like

  • Sign up today and get $5 free
  • Fractals Available
  • Paypal Available

Min Deposit

$0

Charge per Trade

$1 to $9 PCM

Rating

Visit Now

Investing in financial markets carries risk, you have the potential to lose your total investment.

Available Assets

  • Total Number of Shares999
  • US Stocks
  • German Stocks
  • UK Stocks
  • European Stocks
  • EFTs
  • IPOs
  • Funds
  • Bonds
  • Options
  • Futures
  • CFDs
  • Crypto

Charge per Trade

  • FTSE 100 $1 - $9 per month
  • NASDAQ $1 - $9 per month
  • DAX $1 - $9 per month
  • Facebook $1 - $9 per month
  • Alphabet $1 - $9 per month
  • Telsa $1 - $9 per month
  • Apple $1 - $9 per month
  • Microsoft $1 - $9 per month

Deposit Method

  • Wire Transfer
  • Credit Cards
  • Bank Account

Ali Raza

Ali Raza

A journalist, with experience in web journalism and marketing. Ali holds a master degree in finance and enjoys writing about cryptocurrencies and fintech. Ali’s work has been published on a number of cryptocurrency publications.