The global total of negative-yielding sovereign debt declined to US$10.4 trillion as of November 1, down from US$10.9 trillion on September 12, according to Fitch Ratings.

The rise in eurozone bond yields and modest dollar appreciation since September have sent the total stock of negative-yielding bonds to their lowest level since the end of May.

While the outstanding amount of negative-yielding sovereign debt declined in recent months, the persistence of low- and negative-yielding debt globally will continue to take its toll on investors, particularly buy-and-hold investors such as insurance companies.

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As older, higher-coupon bonds mature, income-oriented bond investors are forced to buy newer bonds that are being reissued with dramatically lower coupons. For other bond investors, price sensitivity to changes in interest rates is exacerbated by the increasing stock of low-coupon debt. All else being equal, duration and price sensitivity are greater for lower-coupon bonds.

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European sovereign bond yields have ticked higher in recent weeks, driving the majority of the decrease in the negative-yielding debt total. In aggregate, the stock outstanding in Europe declined by about US$450 billion in the time frame. Italy in particular has seen a sharp decrease in outstanding negative-yielding debt amid political concerns surrounding Prime Minister Renzi’s December referendum. In Italy, debt trading with sub-zero yields fell to US$340 billion outstanding from US$480 billion outstanding since September 12.

Japan still has the most negative-yielding debt outstanding of any country, with US$6.9 trillion. Long-term yields have been mostly stable in Japan since September, following the BoJ’s decision to target a near zero percent yield for its 10-year government bond.

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