People have been saying this since 2010. I think it's much more likely that negative yields are the new normal. I expect <10yr yields to go negative in the US eventually. The fed was able to tighten rates in 2016-2017 without anyting bad happening. Everyone keeps thinking things will end badly. Maybe they won't. My $ is on the latter.
Negative yields will not last forever, because negative yields do not really make economic sense. Right now it is propped up by institutional rules and pressures, but those institutions will eventually become antiquated if they have to accept negative real rates of return. Keep in mind that prior to COVID-19 interest rates were rising in the US, and it is nearly certain that interest rates will continue rising (we are seeing a short-term decline in rates now because of market forces, but the longer term trend is upward) for the next decade. Either Congress is going to work through its seemingly endless gridlock and start funding long-term solutions to problems (e.g. infrastructure) and inflation will accelerate as a result, or the gridlock will lead to a default on the debt and interest rates will spike.
One way or another interest rates will be forced to rise, especially at the longer duration end of the yield curve.
Europe even worse than these above. We leave us without tools for economic troubles when we are declining to raise interest rate and sell assets on business cycle peak.
How does Europe have it worse when the debt to GDP ratio of the combined Eurozone federal governments for example is lower than the US fed? Further, most eurozone countries, like Italy don’t have sub national debt(its regions and cities can’t legally have debt), where as states like California are massively in debt, but that sub national debt in the US is never calculated in debt ratios. Further, the last time I checked, debt held by private households in the US is also much higher on average.
In time of an economic crises, Municipality have a much simpler making of bankruptcy than national government. Same on household. But I call Eurozone worse because ECB have less room on moving interest rate so fewer tools. My above point more was that both are in badly because of never recovering after the previous issues.
