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UPDATE 1-Negative yielding debt pile shrinks in euro zone, UK amid global selloff - Tradeweb

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Saikat Chatterjee
·2 min read
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(Adds quotes, detail, graphic)

By Saikat Chatterjee

LONDON, March 1 (Reuters) - The pool of euro zone government bonds with a negative yield shrank by nearly a fifth in February as a broad selloff in global bond markets forced traders to dump safe-haven debt, data from electronic bond trading platform Tradeweb showed on Monday.

Government borrowing costs from the United States, Germany to Australia ended February with their biggest monthly rises in years as expectations for a post-pandemic ignition of inflation roiled global markets.

Ten-year benchmark yields in France, Austria and Ireland all popped into positive territory in February for the first time in months as a selloff in U.S. Treasuries reverberated across the global bond markets.

Tradeweb said the market value of euro-denominated government bonds traded on its platform with a negative yield stood at around 5.57 trillion euros ($6.70 trillion) at the end of February. That was almost 63% of a total market worth roughly 8.9 trillion euros.

In January, the pool of negative-yielding euro area government debt stood at 6.6 trillion euros or 73% of the total market.

A similar trend was seen in the British bond market. The market value of British gilts traded on the Tradeweb platform with a negative yield nearly halved to around 28% of a total market worth 2.4 trillion pounds ($3.35 trillion) as of the end of February, compared to almost 45% in January.

Tradeweb data also showed a 1.18 trillion-euro pool of negative-yielding euro-denominated investment grade paper -- almost 33% of the market at the end of last month, down from almost 43% in January.

"We have added a substantial amount of debt over the last year and the rise in yields pose a challenge to refinancing costs over the longer term, forcing central banks to keep yields contained," said Kaspar Hense, a portfolio manager at Bluebay Asset Management which manages $67 billion in assets.

Rising government bond yields pose a challenge for central banks trying to steer economies through the COVID-19 crisis. They feed through to the real economy by raising the rates at which banks lend and consumers borrow, thereby tightening financial conditions.

$1 = 0.8311 euros) ($1 = 0.7174 pounds)

(Reporting by Saikat Chatterjee; Editing by Dhara Ranasinghe and Angus MacSwan)