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The negative-yielding bond universe has swelled above the $10tn mark again, as the fixed income markets have regained its footing after last year’s ferocious post US election sell-off.

The value of sub-zero yielding government and corporate debt peaked at just $14tn last September, when signs of a global economic pick-up began chipping away at the pile. The election of Donald Trump in November stoked expectations of growth and inflation-accelerating fiscal spending, and sent bond yields rocketing higher.

But government bond markets have calmed down in 2017, with the 10-year Treasury yield largely drifting sideways at about 2.5 per cent for most the year thus far. Eurozone bonds have also steadied, and as a result, the total value of negative-yielding debt climbed to just under $10.5tn at the end of Tuesday, up from $9.8tn on February 21, according to Tradeweb, a bond trading platform.

In Europe, German bonds constituted the greatest portion of negative yielding government debt ($876bn), followed by France ($799bn), the UK ($399bn) and Italy ($352bn). Japanese government debt and bills trading in negative territory was $5.783tn, but Tradeweb’s figures do not include yen-denominated corporate debt, so the Japanese total may well be greater.

The data does not account for Wednesday’s bond sell-off, with the 10-year US Treasury, UK Gilt and German Bund yields climbing by about 4-5 basis points to 2.56 per cent, 1.23 per cent and 0.36 per cent respectively.

Nonetheless, the still-mammoth pile of sub-zero yielding debt underscores how investors remain unconvinced that a new bond bear market era is looming, despite signs of quicker global economic growth and a looming interest rate increase from the US Federal Reserve.

Copyright The Financial Times Limited 2018. All rights reserved.

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