(Bloomberg) — Bond investors seeking alternatives to negative yields in Japan and Europe by buying Treasuries and government securities in other countries may keep long-term interest rates down, according to Fitch Ratings.
The trend may complicate efforts by the Federal Reserve to tighten monetary policy, Fitch analysts Robert Grossman, Bill Warlick and Jonathan Boise said in a report released Wednesday.
"Insurance companies, banks, pension funds and money-market funds are heavily invested in government debt," they wrote. "Despite gains booked on many of these securities over the last several years, yields for these institutions' portfolios have fallen sharply, and their ability to maintain profits has been reduced."
Fitch is joining the effort to decipher negative rates and determine how to react to them. They've caused such market turmoil that the Bank of Japan put out a report that answers questions including "Are you really doing negative rates?" and "What is deflation?" Billionaire investor Warren Buffett told CNBC in April he never expected borrowing costs to fall below zero, and that their full impact is unknown.
