World upside down after negative Bund yields – Deutsche AM CIO

Stefan Kreuzkamp, chief investment officer at Deutsche Asset Management, has responded to the historic news of negative yields on German government debt as marking a shift into a new era in which a key benchmark used to value other assets has been undone.

Ten-year German Bund yields are the measure of all things in finance. A minus in front of the interest rate is a symbolic manifestation of a world turning upside down. The evaporation of this reference distorts every single asset class,” he said.

“As we approached this negative interest rate scenario, there have been some winners and many losers. German savers are in the losing camp because their exposure to equities and real estate is below the average of other countries, while the share of savings accounts is above average.”

“A negative interest rate has one benefit: It forces Germans to reconsider their investment behavior.”

“Of course there is no actual right to receive a positive interest rate. However, a market economy depends on prices providing accurate signals. The QE programs rolled out by central banks have distorted the demand side to such an extent that it no longer gives a proper indication of the savings and investment environment in the economy.”

A negative yield on they benchmark 10-year Bund suggests investors are telling the German government that they are so concerned about other assets that they are prepared to pay to own German government debt rather than expect a positive return.

Jonathan Boyd
Editorial Director of Open Door Media Publishing Ltd, and Editor of InvestmentEurope. Jonathan has over two decades of media experience in Japan, Australia, Canada and the UK. Over the past 17 years he has been based in London writing about funds and investments. From editing the newsletter of the Swedish Chamber of Commerce in Japan in the 1990s he now focuses on Nordic markets for InvestmentEurope. Jonathan was awarded Editor of the Year at the Professional Publishers Association (PPA) Independent Publisher Awards 2017. Shortlisted for the same in 2016, he was also shortlisted in 2017 and 2015 for the broader PPA Awards category Editor of the Year (Business Media).

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