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What the world’s rising pile of negative-yielding debt means for U.S. Treasurys


a close up of a busy city street © Cesar Manso/Agence France-Presse/Getty Images

THE TELL

The search for yield is still a struggle.

The pile of debt around the world that offers a negative nominal yield — meaning that investors would effectively have to pay for the privilege of parking their money — is on the rise again.

According to the Financial Times, a Barclays index shows the amount of debt offering negative yields now stands at $16.5 trillion, a six-month high.

Earlier this week the yield on 30-year German government debt slipped below 0% for the first time since February and was trading Thursday at -0.051%. That means the entire German government yield curve now trades in negative territory again.

Japanese yields have also declined, with the 10-year government bond yield slipping back below 0% this week. Yields fall as bond prices rise. The European Central Bank and the Bank of Japan are both holding official interest rates below zero.

It’s part of a global story that saw yields rise in the early part of this year as investors bought into expectations for a reflationary surge as the world economy reopened in the wake of the COVID-19 pandemic. Inflation eats away at the stream of interest payments offered by bonds. Rising inflation worries sparked a bond selloff, which drove up yields.

More recently, inflation worries have given way to an economic growth scare, partly due to the prevalence of the delta variant of the coronavirus, which is getting some of the blame for the renewed fall in longer-term yields. In the U.S., official rates and debt yields remain nominally positive, but the 10-year rate has fallen sharply, trading below 1.14% — its lowest since February — on Wednesday, before bouncing back somewhat.

The moves have sparked a series of rotations in the equity market, while major averages have scored a string of record highs. The Dow Jones Industrial Average is up more than 14% for the year to date, while the S&P 500 has rallied 17.7%.

It’s no surprise to see negative global yields serving to drag U.S. yields lower.

Nicholas Colas, co-founder of DataTrek Research, pointed to the chart below in a Thursday note, observing that the trend to ever-lower sovereign debt yields started after the financial crisis of 2008. That’s not just the result of bond buying by central banks, but also to a slow recovery from the 2007-09 recession and aging demographics across much of the developed world.

The chart above tracks the 10-year Treasury yield, the bold black line, versus the 10-year yields for Japan (light blue line), Australia (dark blue), the eurozone (orange), Switzerland (red) and the U.K. (green). Over time, the Treasury yield goes from middle of the pack to the top, Colas noted.

While there are other reasons for the retreat by the 10-year yield from its March high just shy of 1.80%, the realization the pandemic is still taking a toll on global economic growth is toward the top of the list, he said, leaving global asset allocators little choice.

Some yield “is better than nothing, so capital is flowing to Treasurys,” he said.


Source: What the world’s rising pile of negative-yielding debt means for U.S. Treasurys

Lalibela: Ethiopia's Tigray rebels take Unesco world heritage town


image captionThe rock-hewn churches of Lalibela are a Unesco world heritage site

Rebels from Ethiopia's northern Tigray region have taken control of the town of Lalibela, a Unesco world heritage site in neighbouring Amhara region.

Lalibela, home to 13th Century churches hewn from rock, is a holy site for millions of Orthodox Christians.

Residents have been fleeing the rebel advance, local officials told the BBC.

Thousands have been killed since war broke out last November. Fighting is now spreading into Amhara and Afar, another region bordering Tigray.

Millions of people have also been displaced.

Both the Tigray rebel forces and the Ethiopian army and its allies have been accused of committing human rights abuses and war crimes.

The deputy mayor of Lalibela, Mandefro Tadesse, told the BBC that the town was under the control of the Tigray rebels.

He said there had not been any shooting, but residents were fleeing from the town and he was concerned about the safety of the historic churches.

There are 11 medieval monolithic cave churches carved out of rock that date from the 12th and 13th Centuries. They were built as a substitute for pilgrimages to the Holy Land, which was unreachable at the time.

"This is the world's heritage, and we must cooperate to guarantee that this treasure is preserved," Mr Mandefro said.

The spreading fighting follows significant territorial gains made by the rebel Tigray People's Liberation Front (TPLF) in June, including capturing the Tigray regional capital Mekelle after Ethiopian troops withdrew and the government declared a unilateral ceasefire.

The TPLF was the regional government of Tigray until it was ousted by federal forces last November.

It has been designated a terrorist organisation by the Ethiopian government.

However, the rebels say they are the legitimate regional government of Tigray.

Earlier this week a rebel general told the BBC that the group aimed to force the federal government to lift a blockade in the region and agree to a political solution to the crisis.

The government denies there is a blockade and has ruled out talks.

However the TPLF's push into Amhara and Afar has drawn international criticism, and both the UN and the US this week called for all parties to stop fighting.

The Ethiopian government says more than 300,000 people have been displaced in Amhara and Afar.

Separately the UN said 175 lorries carrying humanitarian aid had arrived in Tigray.

But the head of the UN's World Food Programme (WFP) warned that more than 100 lorries were needed every day to reach the millions who were in need.

Aid workers have struggled to get access to much of Tigray due to insecurity and bureaucratic hurdles.

More on the Tigray crisis:

media captionFrom 2019: Exploring the churches carved from rock

More on this story
  • Bodies wash up in Sudan-Ethiopia border river

  • Ethiopia's Tigray war - and how it erupted

  • The mastermind behind the rebel advance in Tigray


  • Source: Lalibela: Ethiopia's Tigray rebels take Unesco world heritage town

    The World Has Been On Fire For the Past Month. Here's What It Looks Like


    a lot of smoke around it: Firefighters take a defensive stand against a home burning in Redwood Valley, Calif., ignited by an 80 acre wind whipped brush fire fed by tinder dry conditions on July 7. © Kent Porter—The Press Democrat/AP Firefighters take a defensive stand against a home burning in Redwood Valley, Calif., ignited by an 80 acre wind whipped brush fire fed by tinder dry conditions on July 7.

    Flames light up hillsides in British Columbia. Smoke swells over highways into Athens. A swimming pool in California is surrounded by charred rubble. Thick forests in Siberia lie shriveled and brown.

    Countries across the northern hemisphere this summer are experiencing the worst wildfires in years of recorded history, with large swaths of land and entire towns in Europe, North America and Russia consumed by flames since the start of July.

    Though many of these countries are used to summer fire seasons, climate change is making the hot, dry conditions that allow fires to catch and spread more common and more intense.

    In parts of the western U.S., a summer of intense heat waves has arrived on the back of a weak rainy season, as a two-year-long drought stretches on. In mid-July, fires broke out in parts of Oregon and California, together consuming more than 230,000 hectares, part of a nationwide toll of over 1 million hectares burned so far in wildfires this year.

    a man standing next to a mountain: Firefighters battle a wildfire in Mugla, Marmaris district, Turkey, on Aug. 2. Turkey's struggles against its deadliest wildfires in decades come as a blistering heatwave grips southeastern Europe. | Yasin Akgul—AFP/Getty Images © Yasin Akgul—AFP/Getty Images Firefighters battle a wildfire in Mugla, Marmaris district, Turkey, on Aug. 2. Turkey's struggles against its deadliest wildfires in decades come as a blistering heatwave grips southeastern Europe. | Yasin Akgul—AFP/Getty Images a small boat in a body of water with a city in the background: A couple rides a pedal boat as smoke from nearby forest fires hangs over the city of Yakutsk, in Sakha (Yakutia), Russia on July 27. | Dimitar Dilkoff—AFP/Getty Images © Dimitar Dilkoff—AFP/Getty Images A couple rides a pedal boat as smoke from nearby forest fires hangs over the city of Yakutsk, in Sakha (Yakutia), Russia on July 27. | Dimitar Dilkoff—AFP/Getty Images a sunset over a forest: Fire retardant dropped from an airplane falls to the ground near the Chuweah Creek Fire as wildfires devastate Nespelem, Wash. on July 14. | David Ryder—Reuters © David Ryder—Reuters Fire retardant dropped from an airplane falls to the ground near the Chuweah Creek Fire as wildfires devastate Nespelem, Wash. on July 14. | David Ryder—Reuters

    In early July, the Canadian province of British Columbia became an icon for the extremes of destruction that wildfires can bring: the small town of Lytton briefly became one of the hottest places on earth, obliterating Canada’s heat records with temperatures topping 49.5° C (121.1° F). Then a fierce wildfire tore through town, destroying 90% of its buildings and leaving residents minutes to escape.

    This month, southern Europe’s Mediterranean countries are sweltering under one of the worst heat waves to hit the region in decades. The temperature in one town in northern Greece reached 47.1°C (116.8°F) on Aug. 4, not far below Europe’s all-time record of 48°C (118.4°F). Fires in the south of the country hit residential areas on the outskirts of the capital, Athens, forcing people to flee into the city center as huge smoke plumes followed them.

    In Turkey, the most severe fires on record have burned through more than 11,000 hectares of forest, killing eight people, most of them in the southern town of Manavgat. The devastation has led to anger at Turkey’s government, which has struggled to respond to the flames, admitting it has no working firefighting planes.

    a herd of sheep standing on top of a dirt field: Men gather sheeps to take them away from an advancing fire in Mugla, Marmaris district, Turkey on Aug. 2. | Yasin Akgul—AFP/Getty Images © Yasin Akgul—AFP/Getty Images Men gather sheeps to take them away from an advancing fire in Mugla, Marmaris district, Turkey on Aug. 2. | Yasin Akgul—AFP/Getty Images bright city lights at night: Firefighters battle the Sugar Fire, part of the Beckwourth Complex Fire, burning in Plumas National Forest, Calif., on July 8. | Noah Berger—AP © Noah Berger—AP Firefighters battle the Sugar Fire, part of the Beckwourth Complex Fire, burning in Plumas National Forest, Calif., on July 8. | Noah Berger—AP

    In Italy, where some 800 fires burned this week across multiple regions, tourist resorts on the eastern coastal town of Pescara rushed from a resort beach as a nearby wood went up in flames on Aug. 1.

    Almost 2,000 miles north of the Mediterranean Sea, in northern Finland—where wildfires are rare—flames consumed 300 hectares of forest in the remote Kalajoki River basin in the last week of July, the worst wildfire recorded in the country since 1971.

    Some of the world’s most worrying fires, in terms of managing climate change, have happened a few thousand of miles east of Finland, in eastern Russia’s Siberian Yakutia region. There, more than 4.2 million hectares have burned so far this year, and scientists fear they are destroying wetlands and causing layers of permafrost to melt—which could release large amounts of methane, a powerful greenhouse gas. On Aug. 4, the E.U.’s Copernicus Atmosphere Monitoring Service said fires in the area had unleashed 505 megatonnes of carbon dioxide equivalent into the atmosphere—already surpassing 2020’s record for emissions released in an entire fire season, 450 megatonnes.

    All of this could put us at risk of falling into a devastating cycle: as the greenhouse gases released by fires like these—and by other human activities including the burning of fossil fuels—continue to drive up global temperatures over the coming years, conditions will likely become even more favorable for fires, which in turn could keep driving up temperatures. If we can manage to rapidly cut our emissions, set up programs to restore natural ecosystems and get much better at preventing and controlling wildfires, we could, possibly, put a stop to that cycle some day. But between now and then, there may be many more fire seasons like this.

    a man riding a skateboard up the side of a road: Forest fire rages in Varybobi, north of Athens, Greece on Aug. 3. Residential areas in Athens northern suburbs were evacuated as wildfires reached the outskirts of the city. | Gerasimos Koilakos—NurPhoto/Getty Images © Gerasimos Koilakos—NurPhoto/Getty Images Forest fire rages in Varybobi, north of Athens, Greece on Aug. 3. Residential areas in Athens northern suburbs were evacuated as wildfires reached the outskirts of the city. | Gerasimos Koilakos—NurPhoto/Getty Images a body of water with a city in the background: View of a beach resort as a wildfire burns on a hillside in Osoyoos, British Columbia, Canada, on July 20. | Sara Mahony—Reuters © Sara Mahony—Reuters View of a beach resort as a wildfire burns on a hillside in Osoyoos, British Columbia, Canada, on July 20. | Sara Mahony—Reuters a group of people flying a kite: Children watch a helicopter dumping water on burning peatland at Palem Raya village in Ogan Ilir district, South Sumatra, Indonesia, on July 31. | M. Hatta—Xinhua/eyevine/Redux © M. Hatta—Xinhua/eyevine/Redux Children watch a helicopter dumping water on burning peatland at Palem Raya village in Ogan Ilir district, South Sumatra, Indonesia, on July 31. | M. Hatta—Xinhua/eyevine/Redux a close up of a tree: This aerial picture shows the shadow of an aircraft of the Air Forest Protection Service flying over a burned forest outside the village of Berdigestyakh, in the republic of Sakha (Yakutia) in Siberia, Russia on July 27. | Dimitar Dilkoff—AFP/Getty Images © Dimitar Dilkoff—AFP/Getty Images This aerial picture shows the shadow of an aircraft of the Air Forest Protection Service flying over a burned forest outside the village of Berdigestyakh, in the republic of Sakha (Yakutia) in Siberia, Russia on July 27. | Dimitar Dilkoff—AFP/Getty Images a cat sitting on top of a building: A dead goat lies on the ground in a burnt-out riding club after a forest fire in the Varibobi region of northern Athens, Greece on Aug. 4. | Angelos Tzortzinis—DPA/picture alliance/Getty Images © Angelos Tzortzinis—DPA/picture alliance/Getty Images A dead goat lies on the ground in a burnt-out riding club after a forest fire in the Varibobi region of northern Athens, Greece on Aug. 4. | Angelos Tzortzinis—DPA/picture alliance/Getty Images an aerial view of a beach: In this photo taken by a drone, damaged structures are seen in Lytton, British Columbia, Canada on July 9, after a wildfire destroyed most of the village on June 30. | Darryl Dyck—The Canadian Press/AP © Darryl Dyck—The Canadian Press/AP In this photo taken by a drone, damaged structures are seen in Lytton, British Columbia, Canada on July 9, after a wildfire destroyed most of the village on June 30. | Darryl Dyck—The Canadian Press/AP a man standing next to a fire: Civil Defense personnel monitor a wildfire burning through hills in Qobayat, Lebanon on July 28. A Lebanese teenager was killed as he joined volunteers battling to fight the fire. | Ethan Swope—Getty Images © Ethan Swope—Getty Images Civil Defense personnel monitor a wildfire burning through hills in Qobayat, Lebanon on July 28. A Lebanese teenager was killed as he joined volunteers battling to fight the fire. | Ethan Swope—Getty Images a group of clouds in the sky: A helicopter flies above a fire at Le Capannine beach in Catania, Sicily, Italy on July 30. | Roberto Viglianisi—Reuters © Roberto Viglianisi—Reuters A helicopter flies above a fire at Le Capannine beach in Catania, Sicily, Italy on July 30. | Roberto Viglianisi—Reuters

    Source: The World Has Been On Fire For the Past Month. Here's What It Looks Like



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