(Prohibited by intellectual property law or in any way unlawful use\/appropriation of this article, with heavy civil and criminal penalties for the offender.)<\/em><\/p>\n\n\n\n The situation of negative yields on government bonds and what marks<\/strong><\/strong><\/p>\n\n\n\n The two-month announcement (18\/06\/2019) by ECB President Mario Draghi on\nthe possibility of implementing a new quantitative easing program in the\nEurozone which is coupled with the raging trade war between the US and China,\nlead to the yields of government bonds in the Eurozone either to be permanently\nin a negative sign or to be altered between negative and positive sign.<\/p>\n\n\n\n The table below is indicative of what applies to yields in most of the government bonds in the Eurozone but also in other countries (Source: www.worldwidegovernmentbonds.com<\/a> )<\/p>\n\n\n\n Recently the FED decided to reduce its base borrowing dollar rate after too\nmany years. Deutsche Bank recently announced last week that there are currently\nworldwide government bonds worth $15 trillion that have negative yields. <\/p>\n\n\n\n So, given all this data, the investors are deciding to sell their shares\nand are constantly seeking safe shelters for their funds in government bonds.\nThis is the main reason that due to the drastic increase in demand for\ngovernment bonds, government bond yields are in a negative sign.<\/p>\n\n\n\n Investors have found that the main Central banks (e.g. ECB, Bank of Japan\netc.) they are not able to create\ntechnical inflationary pressures to trigger growth in their countries through the\nimplementation of quantitative easing programs in their economies.<\/p>\n\n\n\n Looking at investor expectations for inflation through the 5-year forward\ninflation swaps, we find that investors are waiting in the short-term future\nlow levels\u2019 inflation. For example, today the current 5-year inflation\nexpectation rate is 1.74 for the US, while for the Eurozone the corresponding\ninflation expectation is 0.9%. <\/p>\n\n\n\n So, given that inflation expectations for the coming years are very low,\nthis shows that investors will not be able to demand higher yields from the government\nbonds. In fact, even more pressure is expected on the odds offered, due to a\ndrastic increase in demand worldwide for government bonds.<\/p>\n\n\n\n Inflation is known to reduce the actual purchasing power of incomes and profits from future payments of all kinds of bonds (governmental and corporate). The higher the expectations for future inflation, the lower the prices of bonds (due to the drastic reduction in demand for them) which results in higher yields.<\/p>\n\n\n\n The state of the economies<\/strong><\/strong><\/p>\n\n\n\n On the other side of the Atlantic Ocean, the FED has a greater margin of\nmovements than the ECB and the Bank of Japan, and since the return to the US\n10-year government bond is 1.71%, while in the US 30-year government bond the\nyield is at 2.25%.<\/p>\n\n\n\n The greater the difference between the lending rates of the ECB and the FED\ncentral banks respectively, the higher the cost for investors to hedge\nthemselves against any alterations in the US dollar. <\/p>\n\n\n\n In any case, there are objections to whether the FED will give in to the\npressure of President Trump to implement a policy of reductions for its basic\nborrowing dollar rate, in order to develop the US economy and to\n“squeeze” further China through the trade and monetary warfare.<\/p>\n\n\n\n Currently the image of the US Federal government bond yield curve is\nreversed both in short-term maturation (5Y-2Y) and in medium-term maturation\n(10Y-5Y), while in long-term maturation track (30Y-10Y) the yield curve is\nalmost flat.<\/p>\n\n\n\n Last week the performance of the US 10-year government bond (benchmark)\ndeclined below the performance levels of the US 2-year government bond. The\nspread (10y-2y) < 0 is negative and which prepays the upcoming recession in\nthe US. That was the reason why the Dow Jones last week lost all of 800 units\nor -3.05% in a single session. <\/p>\n\n\n\n The yield curves of the government bonds of the countries of Germany, and\nJapan present the same image as the corresponding US yield curve. The German\nyield curve is anticipating the shrinking of the German economy due to its\ndrastic decline in exports from the US-EU secret trade war.<\/p>\n\n\n\n The UK government’s gilts yield curve is in its entirety reversed,\nindicating that after 6 consecutive years of growth will enter a recession due to\nthe anticipated decline of its GDP by Brexit.<\/p>\n\n\n\n Italy has all the economic elements that indicate recession. China is\nunder-developed in relation to the growth rates of the past, gradually losing\ndevelopmental momentum due to the trade war. If China’s annual growth rate is\nreduced to 5%, unemployment will be launched, and social problems will be\ncreated.<\/p>\n\n\n\n The impending recession and the causes of terror<\/strong><\/p>\n\n\n\n 1.<\/strong> The level of the total global debt is higher than the amount it had since 2008. In 2018 the total public debt was more than $65 trillion and compared to $37 trillion that was in 2008. At the same time, the total value of loans in the global economy for 2018 reaches $244 trillion. (Source: IIF).<\/p>\n\n\n\n 2.<\/strong> The monetary policy of the Central banks is not enough to cope with the recession. They have exhausted all their \u201carsenal\u201d.<\/p>\n\n\n\n 3.<\/strong> Due to the trade and monetary wars, there is no need for concerted action in the horizon to tackle the impending recession.<\/p>\n\n\n\n The US is busy with China, while they disagree with the EU. The EU refuses\nto implement US policies (mainly in the Middle East) and is increasingly\nbecoming more energy-efficient with Russia.<\/p>\n\n\n\n Russia, while its citizens each year have increasingly reduced purchasing\npower and increase their credits to cope with the problems of everyday life are\nlooking at US actions. China is concerned with how to suppress protesters in\nHong Kong and not how to find a solution with the United States. <\/p>\n\n\n\n The risk of recession is at the gates, and there is a global\nmiscommunication.<\/p>\n\n\n\n Thanos S. Chonthrogiannis<\/strong><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" The colossal-scale quantitative easing program-colossal sized purchases of government bonds of Eurozone member countries by the ECB-implemented by the ECB during the mid-2010 have…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5,961],"tags":[901,62,61,949,967,964,243,968,417,965,966,282,950,948],"class_list":["post-984","post","type-post","status-publish","format-standard","hentry","category-economic","category-financial-economics","tag-bank-of-japan","tag-ecb","tag-fed","tag-gilts","tag-global-debt","tag-government-bonds","tag-inflation","tag-monetary-war","tag-quantitative-easing","tag-recession","tag-swap","tag-trade-war","tag-yield-curve","tag-yields"],"_links":{"self":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/984","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=984"}],"version-history":[{"count":2,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/984\/revisions"}],"predecessor-version":[{"id":988,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/984\/revisions\/988"}],"wp:attachment":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=984"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=984"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=984"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"https:\/\/www.liberalglobe.com\/wp-content\/uploads\/2019\/08\/NYSE-floor.jpg\")
<\/td> Date: 19th August 2019<\/td><\/tr> <\/td> 10-year yield on Government Bonds<\/td><\/tr> Eurozone Countries<\/strong><\/td> <\/td><\/tr> Germany <\/td> -0,688%<\/td><\/tr> France<\/td> -0,415%<\/td><\/tr> Netherlands<\/td> -0,568%<\/td><\/tr> Slovakia<\/td> -0,410%<\/td><\/tr> Belgium<\/td> -0,363%<\/td><\/tr> Slovenia<\/td> -0,218%<\/td><\/tr> Ireland<\/td> -0,125%<\/td><\/tr> <\/td> <\/td><\/tr> Non-Eurozone countries<\/strong><\/td> <\/td><\/tr> Sweden<\/td> -0,419%<\/td><\/tr> Switzerland<\/td> -1,087%<\/td><\/tr> <\/td> <\/td><\/tr> Japan<\/strong><\/td> -0,225%<\/td><\/tr><\/tbody><\/table>\n\n\n\n ![\"\"](\"https:\/\/www.liberalglobe.com\/wp-content\/uploads\/2019\/08\/1979_10000_Treasury_Bond_.jpg\")
Photo by Author: J. Herbstrman, Source: Own work,
licensed Public Domain, https:\/\/en.wikipedia.org\/wiki\/Public_domain<\/figcaption><\/figure><\/div>\n\n\n\n