0% or Negative Yields Are Becoming The “New Normal”

image credit to stewcap.com

Would like to share some great articles on “Negative bond yield and QE”...with more and more central bankers lowering the interest rate and implementing more QE, the world is flooded with liquidity and resulting  $17 Billion of  negative-yielding bond sitting and idling on various financial institution’s balance sheet around the world.

  What does a negative bond yield mean? < source: Investopedia.com>

Why do investors buy negative yield bonds? <source:ft.com>

image credit to Bloomberg finance.com

With this unstoppable pace of money printing, the market will become more volatile... all conventional methods of assets valuation will also become obsolete... you may notice that it will become "new normal" for some S-REITs to have yielded lower than 4% (especially from those with a stronger sponsor like Mapletree or Capital families).

Defensive stocks like Utilities and REITs might become the next target of investment for some hot money to flow into as investors / sovereign wealth funds / mutual fund/insurance & endowment funds, all are chasing to get a better yield than “zero-coupon” bonds. If low interest rate environment continues for a longer period of time, we may possible seeing many REITs with a yield of 2-3% when others investment asset classes are getting negative to zero interest/yield.

Fundamentally, S-REITs may look overvalued ( base on the traditional valuation of PB/ Dividend Yield ) but because of T.I.N.A  and F.O.M.O, the price may increase further with more and more "hot money" pouring into this market, as such 2-3% dividend yield may suddenly look great and acceptable when others are just giving almost zero yields.

If that happens, most of the defensive stocks may have a chance to achieve “higher high” when more and more fund managers start pouring money into these sectors in chasing for higher returns.

But one must remember that when such asset classes are having high or lofty valuation due to price increase, it becomes much more “volatile “, that any small news or event could see a wild swing in stock price tremendously.

With this, please fasten your seat belt and enjoy the ride ….

Cheers !!

Further reading :

陶冬的博客

新浪个人认证瑞士信贷第一波士顿董事、亚洲区首席经济分析师陶冬

http://blog.sina.com.cn/taodong

标签： 零利率 财政赤字 货币政策 理财 收益

The Zero Lower Bound (ZLB，零负利率) 最近火爆了，从经济学界到金融市场不少人在谈论这个概念。ZLB数十年前作为一个概念被经济学家讨论过，指当名义利率接近零甚至低过零的时候，进一步降低利率便无法鼓励企业从事投资，对刺激经济帮助不大，用凯恩斯学派的话讲就是“流动性陷阱”。

流动性陷阱的教科书范例，就是近三十年的日本。由于企业看不到需求前景和通胀未来，对货币政策的下调并不敏感，央行在接近零边缘拼命作边际降息，但是对投资几乎没有刺激作用，缺少就业机会，消费也就无以为继。

凯恩斯的学术对头弗里德曼对流动性陷阱概念不以为然，货币主义学派认为利率见零不是问题，继续扩张基础货币来刺激经济就是了。将此学术意境发扬光大的是前联储主席伯南克，他的外号叫Helicopter Ben，在金融危机后真的站在直升机上撒钱，他的QE政策为现代金融历史揭开了新的篇章，也制造出全新的货币政策工具，更将央行的纪律和廉耻感彻底抛弃了。

流动性陷阱，正在由日本向全世界扩散。QE政策，正在由“非常时期的非常规措施”变成货币政策的常备工具。央行一有需要就动用量化宽松政策早已成为现实，但是大大方方讲出来的第一人是欧洲央行总裁德拉吉，而且又是whatever it takes那么坚定，一派不达目的誓不罢休的架势。

欧洲央行的新一轮扩张政策能否真的对欧洲经济带来刺激作用，见仁见智，但是它的市场冲击已经排山倒海般地涌现过来。多数欧洲国家的国债利率已经全方位地陷入负值，连德国三十年期国债的收益也是负值。欧洲甚至有银行按揭贷款利率是负的，这在金融意义上是匪夷所思的，从风险角度看简直是玩火。

欧洲的新一轮QE，带来了全球性的金融生态环境的改变。本土零风险资产的收益彻底坍塌了，为了维持固定的开支，欧洲年金、保险公司空巢将资金搬向美国，唯有美国国债市场既有收益又够规模和流动性，美债曾在八月份惊爆2008年底以来未见的大牛市，国债收益率全线下沉，三十年期国债利率跌破2%，走出历史新低。

一场抢夺收益债券的大战已经爆发，资金数量和杠杆都是罕见的，其背后并非投机，而是零负利率环境。零负利率环境带来了资金对收益的渴求，这是央行政策一手造成的，而货币政策又折射着决策者对流动性陷阱的束手无策。笔者认为，这是一个新时代的降临，全球零负利率时代的降临。

欧洲货币政策鸽声嘹亮，肯定会带来全球性的政策连锁反应。日本经济、中国经济都需要进一步的刺激措施，欧洲央行突破底线，给其它央行制造出新政策的空间。美国联储，多少有一点贞操感，面对特朗普推特和市场抛售的双重压力，鲍威尔把七月份降息形容为周期中部的灵活操作，目的在于应对全球贸易环境不确定性，并非新一轮降息周期的开始。

这个表述为美国债市带来了一场灾难性的动荡，事后联储高官连番补救，九月例会再次降息一码，并在前瞻性指引中提示今年还有第三次降息，事实上已经为“周期中部”提法盖棺定论。虽然联储目前仍然坚持明年可能无需降息，最多降息一次，笔者相信美国的市场利率也在向零利率方向迈进。

海外资金的疯狂入侵，正在将美国的国债利率和资金成本压到一个不正常的水平，这种趋势令价格信号失灵。如果对此不加制止，新的金融增杠杆是必然的，可能催生下一个次贷危机。联储在利率和监管上必须要采取措施。同时，货币政策越来越成为财政政策的附庸，白宫加大赤字财政的力度，联储也不得不跟随。鲍威尔在九月记者会上尴尬地承认了这个处境，明言重启量化宽松的时间可能早过预期。

美国的经济形势好过其他国家，联储暂时不需要将利率一拉到底，货币当局也在尝试维护政策独立性。但是在海外资金大举入侵的大时代，又面临行政当局和债券市场的双重逼宫，笔者认为货币政策在且战且退中逐步迈向零利率恐怕只是时间的问题。

零负利率状况，为监管带来巨大的挑战。银行将大量资金投在收益接近于零甚至低过零的债券中，一旦通货膨胀出现反弹或发生政治／地缘政治事件，债市利率意外反弹的话，对银行资本金的伤害可能是巨大的。资金零成本也必然刺激杠杆投资活动，必然制造风险错位的新投资行为，次贷危机记忆犹新，新的温床已在产生。

零负利率可能派生出新的财政灾难。市场周期通常带来政府发债成本的起落，而此调节政府发债能力，必要时以债务危机的形式逼迫政府消减财政赤字。零负利率环境，人为地废除了市场的调节机制，让政府在错误的价格讯号下过度花费。欧洲已经在谈论放松财政制约，加上发债成本极低，接下来可能发生的事情是可想而知的。近年在经济学界崛起了一派现代货币理论，认为财政赤字不可怕，只要央行不断扩大基础货币，将财政赤字货币化就可以维持下去了。这个理论如同天上掉馅饼一样，但是特朗普的减税政策、未来欧洲的财政扩张都可以见到此理论的影子。

对于投资者，零负利率或成为未来十年的新常态。银行储蓄、理财产品的收益率估计会一跌再跌，靠这类收益维生的人群可能遇到收不敷支的窘境。如此环境之下金融机构的盈利能力会遇到重大挑战，一有不慎甚至可能危及资本金。QE在本质上本来就是劫贫济富的收入再分配，缺少投资机会或能力的社会底层人士实质收入进一步下降，势必进一步撕裂社会。但是由于政治家利益、任期和手段的错位，饮鸩止渴的事情一次又一次发生。笔者的建议是，趁现在部分资产还有合理收益的时候尽快锁定长期稳定收益，不要纠结现在的收益比过去已经低了很多，生态环境已经变了，你的投资策略也应该改变。

本文原载于财讯，为个人观点，并非投资建议或劝诱

Impact of negative rates on global capital flows <source:moelisaustralia.com>

In investing, strange things can happen. Things that you never expect to see. And if you went back a decade ago and surveyed investors, I don’t think you’d find anyone predicting negative interest rates.

What exactly does that mean? 

It means if you buy those bonds and hold them to maturity you are guaranteed to lose money. Considering the premise of investing is based on the expectation of achieving a profit, then bonds are proving to be the antithesis.

The recent chart from the Financial Times (FT) below shows the stark changes that have occurred in the global bond markets since early this century. Today, almost 60% of the world’s bond markets yield less than 2% compared to some 20% in 2004.

“Right now, approximately 13 trillion dollars’ worth of investors’ money is held in zero or below-zero interest-rate-earning debt. That means that these investments are worthless for producing income. 

Thus far, investors have been happy about the rate/return decline because investors pay more attention to the price gains that result from falling interest rates than the falling future rates of return.

That will end when interest rates reach their lower limits (slightly below 0%), when the prospective returns for risky assets are pushed down to near the expected return for cash, and when the demand for money to pay for debt, pension, and healthcare liabilities increases”  - Ray Dalio, July 2018.

< Now the total bond with negative or zero yield had gone up to more than USD $17 Trillion in 2019>

Capital is already on the move

It appears investors have started to search for alternative sources of return. It’s little wonder that money has started pouring into private equity funds which offer the potential at least for positive returns. The FT recently reported that Europe’s biggest private equity groups are rushing to raise new mega-funds as they seek to tap into record demand from investors. Data from private equity specialists, Prequin, show almost $2.5 trillion of unspent cash is at the ready to buy companies, real estate, infrastructure, natural resources and debt. 

We think it’s likely private equity will look to deploy their record levels of capital into the public equity markets where there remains opportunities to buy quality businesses at reasonable valuations, which are actually cheap if low bond yields are here to stay. Assets that offer higher yields are being sought and this has been most clearly reflected in the positive re-rating of commercial real estate, REITs, utilities and other bond-like proxies.