Bonds are sliding toward negative territory across the developed world. Among the largest industrialized economies, only the United States is offering over 2% yields on 30-year bonds. And it's not just the global economic pillars pushing rates down, but even in places like Poland that stretch the definition of "developed" market. Or Italy, which push the boundaries of concepts like "balanced budgets." And even in Greece, which stretches the definition of... pretty much damn near everything.
First, the technical answer.
Part of the shift toward negative territory is quantitative easing (QE). QE is, in essence, the expansion of monetary supply above and beyond what the economy says it needs, and then using the newly "printed" currency to purchase various bonds. This artificially drives down borrowing costs of all kinds and inflates financial markets. The idea behind it is that cheaper borrowing costs and an inflated finance market will boost business and consumer confidence and from that, spending -- thereby boosting demand in the real economy.
Between the American, European and Japanese programs, the equivalent of some $15 trillion has been dumped onto markets through QE since the 2007 financial crisis. One reason for the dollar's strength under Trump is that the United States' QE program largely came to an end several years ago and the US has reverted to using more traditional monetary tools. In contrast, Europe has been at near-zero interest rates for a decade (and Japan for twice as long), leaving QE or things like it as their only means of using monetary policy to stimulate economic activity. The Eurozone, after a brief hiatus, just restarted QE again a few weeks ago. Japan never really stopped.
It all adds up to a lot of money chasing limited investment opportunities. That boosts stock and property markets, while the surge into bonds pushes yields negative.
Second, we have the traditional answer.
There is a whiff of instability surrounding everything. Germany is undoubtedly in recession and will drag much of the Eurozone down with it. Japan hasn't seen reliable, sustained economic growth since the 1980s. The American-Chinese trade war has collapsed global confidence in the Chinese economy while the HK protests have collapsed Beijing's soft power. Meanwhile, it seems that nearly every country in the Middle East is facing some degree of crisis. Even if you're an aficionado of my brand of Kool-Aid and believe that the US is largely resistant to global upheaval, "resistant" is not synonymous with "immune." While I still do not see an American recession on the horizon, the American economy has most certainly slowed.
Recessions — even fears of recessions — have consequences for capital. Spooked investors tend to push money into assets backed by either long-term income streams, government guarantees, or both. Fewer stocks, more bonds. High bond demand pushes yields down towards, to, and through zero.
It isn't so much that either answer is wrong. In fact, they are dead on. But they are not the whole picture. There's something else going on. Something much bigger than QE and much more structural than the normal ebb and flow of economic cycles.
People act differently depending on their age. There's aren't a lot of retirees at spin class, nor do college students frequent buffets that specialize in creamed vegetable products. In a "normal" economy there's a set balance of roughly four children to three young adults to two mature adults to one revered elder. So long as that proportion holds the economic system has some somewhat straightforward characteristics: young workers spend and borrow, mature workers invest, while retirees shift their financial holdings into decidedly less interesting and volatile holdings. Fewer stocks — more t-bills and cash.