World is on the threshold of a new financial crisis - ANALYSIS

Baku. 13 July. REPORT.AZ/ Infusion of cheap money resulting from the transition of return of government bonds of developed countries in the area of negative returns but not in the real economy, in the stock exchange and financial derivatives leads to an artificial increase in prices, which predicts the forthcoming crisis in the world economy.

Analytical Group of Report News Agency declares analyzing the report of Fitch international agency.

The agency's report says that as of June 1, number of countries with a negative return equal to 14. Netherlands recently entered the group. Since June 11, the yield on ten-year government bonds in the country dropped to -0.007%. In general, according to analysts' estimates, the total value of the securities with a negative yield is equal to 13 trillion USD. The total world debt exceeded 250% of the world GDP and each day continues to grow.

In Fitch's assessment, as of June 1 this year, volume of securities with a negative yield amounted to 10.4 trillion USD, 7.3 trillion USD of which are long-term liabilities, 3.1 trillion USD - short-term liabilities. The sharp rise in the volume of securities in June and July is a result of a Brexit referendum. 

The rank of countries with negative profitability continues to grow. The next step is Lithuania with the yield on bonds of 0.5% and Taiwan with a yield of 0.7%. In the US, the yield on ten-year government bonds fell on July 8 to its lowest since 2012 at 1.36%. The reason for the formation of negative rates is related with a desire of investors to invest in government bonds amid global financial market instability, deceleration of the Chinese economy, a sharp decline in commodity prices, volatile currencies and Brexit.

Sustainable global growth is hampered by the factor that central banks prefer not to send their money to real economy, and demand for securities is stimulated artificially. The negative yield is an indication of the serious global challenges, in particular, the growth of state and corporate borrowing.

Analysts of consulting firm McKinsey estimated that since the financial crisis of 2007-2008 and to the end of 2014, global debt increased by 57 bln. USD, or 40% to 200 trillion USD. In addition, volume of derivative financial instruments in the world today is 500 bln. USD, which is more by 7 times than the global GDP.

Notably, the global crisis of 2007-2008 came against the backdrop of problems in the secondary market of the secondary mortgage securities. The global economy is gradually entering a dangerous period and a crisis may occur at any time.