MC Lvmh Moet Hennessy Louis Vuitton SE

By WSJ City 

A growing number of investors are paying governments in Europe for the privilege of holding their bonds.

TO KNOW

--- The amount of negative-yielding government bonds outstanding through 2049 has risen by 20% this year to about $10 trillion.

--- That's the highest level since 2016, according to data from Deutsche Bank Securities.

--- The expanding pool of such bonds highlights how expectations for growth in much of the developed world have deteriorated.

--- The bonds guarantee that a buyer will receive less in repayment and periodic interest than the buyer paid.

--- Government debt sold by countries including Germany, Ireland and Sweden are among those with negative yields.

--- Corporate bonds issued by Sanofi maturing in 2022 and LVMH Moet Hennessy Louis Vuitton maturing in 2021 also currently trade at a negative yield, according to data from FactSet.

Why This Matters

Negative yields mean it will be difficult for developed economies to revive growth should they enter a recession, with historically low interest rates still in place. The European Central Bank's deposit rate is currently minus 0.4%, and policy makers this year ended bond purchases that were intended to boost growth and inflation, adding trillions of euros of government and corporate bonds to the ECB's balance sheet.

"It's just not a great starting point to already have negative interest rates," said Torsten Slok, chief economist at Deutsche Bank Securities. "It's getting more and more difficult for policy makers to respond to headwinds."

A fuller story is available on WSJ.com

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(END) Dow Jones Newswires

April 30, 2019 04:29 ET (08:29 GMT)

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