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Record Amount of Negative-Yielding Debt Signaling Expansion of Global Slowdown

The market value of negative yielding debt globally hit a record $12.5 trillion this past week spurred by investor anxiety over clear signs of a weakening global economy, persistently low inflation, China-US trade tensions and geopolitics, particularly in the Middle East. Why is this so worrisome? A rush into negative yielding bonds historically has occurred right before and during economic bad times. Recent signs of an expanding global slowdown have once again driven investors to rush into the safest assets available, such as government bonds, increasing the number of bonds with negative yields. In other words, in exchange for weathering what they see are economic bad times ahead,  investors are willing to buy bonds that will return less than they paid if they hold the bonds to maturity.

Record Amount of Negative-Yielding Debt Signaling Expansion of Global Slowdown
Record Amount of Negative-Yielding Debt Signaling Expansion of Global Slowdown

Brad Lamensdorf

Brad Lamensdorf, the founder and portfolio manager of Active Alts, is a principal and co-manager of the AdvisorShares Ranger Equity Bear ETF. He previously managed a long-short investment partnership from 1998-2005 under the name Tarpon Capital Management. Earlier in his career Mr. Lamensdorf was an equity trader/market strategist for the Bass Brothers’ trading arm. He managed a short only portfolio in addition to co-managing a $1bil hedging program. He also served as in-house market strategist for the entire internal and external network of Bass Brothers money managers.

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