CNBC: Greenspan Says There Is No Barrier to Negative Yields in the US

August 13, 2019

Article by Maggie Fitzgerald in CNBC financial

Former Federal Reserve Chairman Alan Greenspan said nothing is stopping the U.S. from getting sucked into the global trend of negative yielding debt, Bloomberg reported Tuesday.

“There is international arbitrage going on in the bond market that is helping drive long-term Treasury yields lower,” Greenspan said in a phone interview. “There is no barrier for U.S. Treasury yields going below zero. Zero has no meaning, beside being a certain level.”

With global central banks engaging in unprecedented monetary easing, a record $15 trillion of government bonds worldwide now trade at negative yields. As uncertainty reigns, investors are looking for a safe haven for their money, even if it means getting back less than they gave.

Greenspan, who chaired the central bank from 1987 to 2006, said nothing is standing in the way of the U.S. breaching the zero level.

Greenspan is not alone in his hypothesis. Pimco, one of largest fixed income mangers in the world, said last week that “U.S. Treasuries – which many investors view as the ultimate ‘safe haven’ apart from gold – may be no exception to the negative yield phenomenon. And if trade tensions keep escalating, bond markets may move in that direction faster than many investors think.”

JP Morgan, in a 2016 analysis, said the Fed might one day be pushed to negative yields.

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