Subzero Yields in European Junk Bonds

Negative yields are starting to affect markets for below-investment-grade corporate bonds.

Central bankers hinting at more monetary stimulus have depressed yields so much that even some European junk bonds are trading at levels where investors have to pay for the privilege of holding them.

The number of euro-denominated junk bonds trading with a negative yield—a status until recently associated only with ultra-safe sovereign borrowers—now stands at 14, according to data compiled by Bloomberg. At the start of the year there were none.

Cheap-money policies since the financial crisis have kept interest rates for the past decade at, or near, all-time lows. That’s prompted many investors to buy riskier assets that yield enough for them to meet their liabilities, driving bond markets higher and yields lower. The European Central Bank (ECB) said on Monday it’s ready to add more stimulus to the Eurozone, indicating that an end to the age of ultra-low borrowing costs is far from over.

The European trend follows a global pattern that’s seen the volume of securities yielding less than zero hovering just above $12.8 trillion, according to Bank of America Merrill Lynch.

High-yield borrowers with bonds denominated in euros trading with a negative yield include:

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