When the yield of 10-year Japanese government bonds fell below zero, it marked a new milestone in the negative yield absurdity: it pushed the amount of global government debt sporting a negative return for investors to over $7 trillion...
The ECB too is still gobbling up government debt, as Bank of England Governor Mark Carney noted dryly in his speech on Friday at the G20 conference in Shanghai:
The largest four central banks bought assets worth $1.2 trillion in 2015, similar to the amounts purchased post-Lehman and during the 2013 euro-area crisis. Adjusting for lower government debt issuance, that leaves an unprecedented flow of net QE, with only $400 billion of additional government debt sold to the private sector, compared to $3 trillion in 2010.
However, the effect of QE on the wealth channel cannot last forever. Monetary neutrality means real asset prices are not boosted indefinitely by such policies; their economic effects must ultimately unwind.
Said differently, unless an improvement in fundamentals boosts the underlying cash flows of these assets, real valuations will fall back.