According to the WSJ, a full 33% of sovereign debt worldwide is now issued at negative yields. This is not a new trend, but it coincides with a worldwide rise in stock markets. This pattern breaks the previously known positive correlation between bond yields and stock prices. High bond prices are caused by an overreliance on debt financing and lack of actual capital investment.
The domestic energy sector fell today by 0.86% as measured by XLE as the Middle East regains market share in the oil production industry. The Middle East now holds a 35% share in oil production. The fact that the energy sector was down while the general market was up exacerbates the negative effects of this news.
Economists expect the Bank of England to lower benchmark rates by 0.25% at its meeting tomorrow, a move that will calm the market and thus has already been priced into the market, causing today’s upward movement.