European yields race to zero

More corporate bonds are nearing negative yields in Europe as the threat of QE is looming over the debt markets there. What makes this an interesting phenomenon, and why we didn't see such measures in the US is most likely due to the amount of debt outstanding in the US vs Europe. Many companies in the Eurozone get their financing from banks and do not go into the market to borrow as much as we see in the US. This lack of existing debt makes for a grab on assets for investors looking to gain higher yields than government bonds. US companies are taking advantage of this by borrowing in the Eurozone in the face of higher interest rate in the US. With the 50bln euro buyback looking to soak up a lot of the government debt outstanding, a renewed interest in corporates could last for years to come.

This lasting demand for European bonds will come from the fact that they are just that European. The yields on other bond are most likely to gain, especially in the US, as economic conditions start to improve. Real rates in the US could prove attractive for some time as rates increase but inflation remains tame. This shock will most likely cause some market panic in the stock markets and see a flight to safety into government bonds. But overall the yields in the US should stay higher on a real basis that that of the Eurozone.