April 1, 2019 / 11:28 AM / 6 months ago

UPDATE 1-Pool of negative-yielding euro zone govt bonds at highest since 2016

* Pool of negative-yielding EZ govt bond jump in March

* Tradeweb: almost 47 pct of market now has sub-zero yields

* Share of IG euro corporate bonds also up sharply (Updates with charts, context, comment)

By Dhara Ranasinghe

LONDON, April 1 (Reuters) - The pool of euro zone government bonds with negative yields jumped in March to its highest since 2016, Tradeweb data showed on Monday, in a sign that concerns over global growth are making investors more willing to pay to hold safe-haven debt.

Government bond yields across major developed markets plunged last month as weak manufacturing activity data and an unexpectedly dovish tone from central banks including the European Central Bank and U.S. Federal Reserve fanned fears about economic growth.

Of the roughly 7.67 trillion euros ($8.6 trillion) of euro area government bonds in the Tradeweb system, about 3.58 trillion euros, or almost 47 percent, yielded less than zero percent as of the end of March, Tradeweb data showed.

For an interactive version of the chart below, click: tmsnrt.rs/2V550om

That compared with roughly 38 percent in February and was the largest share since September of 2016, a year in which deflation risks and global growth worries last drove bond yields in the bloc deeply negative.

“The scale of negative-yielding bonds and the fact that yield curves are flattening across the world suggests we’re back to square one,” said Neil MacKinnon, global macro strategist at VTB Capital.

“The message from the bond market is that we have an economic environment that is turning Japanese,” he added, referring to the mix of low growth and low-to-no inflation that has hampered Japan’s economy for years.

The data essentially shows a growing number of investors are willing to pay some governments for holding their debt - for instance, German government bonds out to a maturity of 10 years now have yields below zero. Six months ago, German yields out to five years traded sub-zero.

But the past month has seen a sharp reassessment of global growth conditions, especially in the euro zone where a slowdown in manufacturing shows no signs of abating.

Analysts estimate that the number of negative-yielding bonds globally has risen to around $10 trillion from as low $7 trillion two years ago.

“If you’re looking at bonds with maturities of more than a couple of years, then they will reflect lower rates everywhere in the world and that is prevailing,” said Chris Scicluna, head of economic research at Daiwa Capital Markets.

Monday’s Tradeweb data also showed around 26 percent of euro zone government bonds yield less than the ECB’s deposit rate of minus 0.40 percent, the highest since November 2017.

The pool of negative-yielding investment grade corporate bonds also jumped, rising to 20 percent - its highest in a year.

Analysts said that concerns about the ability of central bank policy to boost economic growth and inflation would mean that pool of negatively-yielding assets was unlikely to shrink soon.

Germany’s benchmark 10-year bond yields dropped below zero percent for the first time since 2016 last month, while Danish long-dated bond yields followed last week.

Dutch 10-year government yields, while higher on Monday, are roughly 15 basis points away from the zero percent mark . ($1 = 0.8896 euros)

Reporting by Dhara Ranasinghe; Editing by Hugh Lawson

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