Fitch has estimated losses of investors from low interest rates in the $500 billion


Global investors in 2016 in comparison with 2011 miss more than $500 billion annual profits from investments in sovereign bonds outstanding, totaling approximately $38 trillion, estimated by analysts of international rating Agency Fitch. Cause of loss — the fall in bond yields as a result of applying the policy of low interest rates by Central banks to stimulate the economy.

“The benefits from cash flow went from global investors towards sovereign issuers, as the cost of sovereign loans has declined in response to the policy of monetary easing by Central banks. This has led to new challenges for income-dependent investors, such as insurers and pension funds, while governments had the opportunity to borrow at very attractive rates,” — noted in the report of the Agency.

Issuers will assess the benefits soon, because already due for payment on the bonds with higher coupon rates, and new bonds are issued with lower or negative rates, analysts said Fitch.

Many investors who buy assets and keep them until the due date of payments will have to invest new money into bonds with much lower interest rates. If low interest rates persist for an extended period of time will likely hit the profitability of many large investment institutions and pension funds, the report says.

Bond yields, which varies inversely to prices, fell worldwide, as Central banks in many developed countries increased purchases of sovereign bonds to stimulate their economies. Such purchases triggered the deficit of safe assets, which has enabled States to sell bonds at lower interest rates.

In the long-term decline in bond yields may lead to the fact that more and more States will move to fiscal stimulus as a tool to stimulate economic growth, the Agency said. Saving extremely low cost of sovereign borrowing may lead to increasing levels of public debt, especially in the case of slow economic growth and the presence of doubts about the effectiveness of monetary stimulus.

Investors in search of higher yields may begin to look for other tools that will reduce yield bonds of developing Nations and high-yield corporations with weaker credit history, Fitch warns. Some are dependent on incomes of institutions such as insurers and pension funds, likely will face increased credit risks in connection with the decline in the yields for quality bonds, specifies the Agency.

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