Corporate Debt: The End of Negative Rates

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Since April, negative interest rates have disappeared from a broad segment of worldwide corporate debt. This is a significant paradigm shift for the fixed income markets, where more than USD 1.5 trillion of corporate debt was still trading at negative rates in August 2021.


Negative rates are closely linked to the ultra-accommodating monetary policies implemented by central banks in recent years. In the eurozone in particular, the ECB’s adoption of negative key rates in 2014, coupled with a first plan of asset purchases (“quantitative easing”) starting in 2015, led to a gradual generalization of negative rates for the safest borrowers in the European market.

Since then, the subject of negative rates has remained mainly European and Japanese. In the US and emerging markets, negative yields have remained almost non-existent. The monetary support deployed in the face of the pandemic has subsequently favored an increase in the amount of negative rates on the European markets in 2020 and 2021.

With global inflation rising, investors are anticipating more restrictive monetary policies. The ECB is expected to end its quantitative easing in July 2022 and to start raising its key rates shortly thereafter. While no companies are borrowing at negative rates anymore, one last exception remains in the sovereign segment, where short-term rates in some European countries are still in negative territory at the moment. This last exception should disappear before the end of the year if expectations regarding the ECB’s policy materialize in the coming months.


The opinion expressed above is dated Mai 20, 2022 and is subject to change

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