Jul

11

So I read that people were holding over 7 trillion of negative yielding government debt instruments. I'm guessing the negative yields were designed to convince them to get rid of the securities, and presumably invest the proceeds in equities.

You're already seeing a bit of this in animal spirits type buying of the utility, staples and reit sectors- but is this something that should continue? Surely pension fund managers don't have negative return targets so I'm just imagining a meeting where you're underperforming your 6% a year target and trying to justify why you own 100 billion 2 year bunds and are paying almost a % a year to do so

Additionally I would never actually invest on a DCF but shouldn't negative rates severely increase preference for high growth stocks, as the dividends 10 years out are worth almost as much as those paid today? It seems like the knee jerk outperformance of slow growth div yield stocks would be incorrect directionally in this case


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