A Black Hole Engulfing the World's Bond Markets
I didn&#x27;t read the whole article (out of free articles on bloomberg and I&#x27;m not going to jump through hoops to get around the paywall), but it seems like the premise of the article doesn&#x27;t match the title here.<p>It&#x27;s not that TVM has disappeared, it&#x27;s that people&#x27;s evaluation of market risk has changed.  It has always been the case that people are willing to accept a lower return for lower risk, and that will always continue to be true for rational people.  Government bonds used to be the second lowest risk option- the absolute lowest risk used to be cash in a mattress (or a safe&#x2F;bank vault), which returned zero percent (or just slightly below zero if you have to pay for storage).  If a bond yield is negative it&#x27;s not that TVM is suddenly wrong, it&#x27;s that enough people seem to think that bonds are lower risk than holding cash.<p>Another option is that enough people think that the only alternative to stocks is bonds, and they forgot all about cash, causing bond yields to dip below cash yields.  I doubt that enough people are dumb enough to forget about the cash option, so I don&#x27;t really think this is the case.<p>I personally think it&#x27;s silly to think a government bond would be lower risk than keeping my money in a safe, but think about the market movers (investment funds).  You can&#x27;t keep a billion dollars at your house, so you probably have to keep it at the bank.  A negative bond yield indicates that you think the government is less likely to disappear than a bank, which at least makes some sense.