The March Toward Negative Yields In Europe

We noted last week that there are six European countries that currently have zero or negative year-over-year percentage change in their consumer price index. It is rare for consumer prices to fall into negative territory. Perhaps equally as rare, investors are now paying to lend money to five governments across Europe. As of September 1st, there are 5 countries (Belgium, Denmark, Germany, Netherlands, and Switzerland) that have 2-year government bonds yielding less than 0% and three countries (Austria, Finland, and France) that have a yield of 0%. Two year yields have fallen between 20-30 basis points for all 8 countries except for Switzerland. Switzerland is in a very unique situation where they have actually seen their yields rise this year, yet, on an absolute basis their 2-year benchmark bond is still yielding -4 basis points. In fact, Switzerland's 2-year bond has had a negative yield for much of the last two years.