First considered a mere curiosity, negative interest rates came to dominate financial and bond markets for years. Japan has finally written the final chapter and closed the book on the story.
The end of negative interest rates is now official after the Bank of Japan made an unexpected change of course, helping to push the yield on two-year Japanese government bonds rose into positive territory for the first time to 0.03 percent this week.
At the same time, a Bloomberg index tracking the market value of negative-yield debt around the world reached zero for the first time since 2010. As recently as the end of 2020, the market value of bonds trading at a negative yield had been over $18 trillion. At the time, central banks had slashed interest rates and launched large bond-buying programs because of the Corona pandemic.
Unthinkable Before 2014
The extraordinary measures taken by central banks were intended to stimulate the economies. Meanwhile, the resulting negative yields, initially seen as a curiosity by investors, became commonplace beginning in 2014.
They spread to more than a quarter of global fixed-income securities, mainly to the eurozone and Japanese government bonds, although some corporate bonds and short-term government debt in the United States and the United Kingdom were also affected.
