Are negative yields taking over the bond market?

As chaos begins to descend into financial markets again after a hiatus that saw oil prices bounce strongly, the Chinese growth dilemma take the backseat and central bankers announcing additional rounds of quantitative easing measures to be put in place, the outlook remains hazy with investors increasingly placing their bets in the least perceived riskiest asset namely government bonds in the hopes that it could yield them some sort of meager return that's been absent in portfolio's in the last year.

Subsequently the demand for high quality government bonds issued by nations such as Japan, Switzerland and now Germany has been driven so far that yields have turned negative, a first time phenomenon that's left many puzzled.

Critics of the current monetary view of Negative Interest Rate Program (abbreviated NIRP) by advanced economies such as those mentioned above have spoken out at arm's length about the distressing outcome these nations could be headed into if they don't allow sanity to prevail in realising the limits of monetary policy having reached an irrevocable end at the extreme side of the spectrum.

A staggering $10 trillion bonds at face value currently trades underneath a yield of 0% which has been steadily rising as the situation spins out of control compelling investors to seek out riskier alternatives that hardly leaves much comfort in its placement. Parlously slated assets that are starting to feature in portfolio's include long dated and junk grade status bonds.

In the case of the former, investors feel it justified to give up the opportunity of lending capital out in the short term just for the opportunity to earn a positive yield!!! Furthermore the implication of such belief leads one to ponder the ramifications that will be felt when desperation no longer holds appropriate and the shift in policy direction takes hold, amounting to immense losses suffered as a result.

For all its worth if one outcome were to come of the present and the future it would be the underlying fact that no single controlling economic policy mechanism is able to steer forth the weight of economic activity without the assistance of the other. It would also stress the need that government's inaptness to respond in a constructive manner doesn't exist under the premise of socialist ideology instead working on a fallacious conception that infinite quantities of money are available at hand to allay the harshest economic circumstance which couldn't be farther from the truth.

The global economy is slowly metamorphosing into the ugly looking monster that reared its head in the Financial Crisis however this time the consequences will be worse.      

Paradigm shift!
Government bonds: 'return-free risky assets'! pic.twitter.com/CPRHqj0a6f

— jeroen blokland (@jsblokland) June 10, 2016