In a world with negative interest rates – actually over 14 trillion dollars’ worth of debt! – infrastructure represents an attractive asset class for investors. For governments, it is undoubtedly an amazing opportunity to invest in the transition to sustainable energy.
Discover an analysis by Jean-François Robin, Global Head of Research at Natixis:
Abnormality has become the norm, the extraordinary has become the ordinary.
We are currently living in a world with negative interest rates, in which the borrower is effectively paid to borrow money, and in which it is becoming very difficult to invest money if you are lucky enough to need to do so. So we are in completely new territory. To put the situation into perspective, it is a very widespread phenomenon – we now have over 14 trillion dollars’ worth of debt that are at negative rates. In other words, we have the entire German national debt that is practically at negative rates. You have more than 80% of French debt. Even more surprisingly, more than half of French companies have negative interest rates. We are well and truly in completely new territory.
Why is this the case?
Essentially because there is no inflation, and when there is no inflation, central banks, and let’s not forget this, the European Central Bank but also the American Central Bank, their main objective, their main raison d’être, is to combat inflation, or in this case deflation; they need to get as close as possible to the magic 2%, and so without inflation, they have to lower interest rates, they are forced to recommence asset purchasing schemes to try and restore liquidity, encourage more growth, so that salaries increase and inflation, little by little, increases.
What can you do in such a context?
If you are an issuer, it is probably a great opportunity to spend money on long-term investments. The cost of long-term loans is currently nothing, even less than nothing. For governments, it is undoubtedly an amazing opportunity to invest in the transition to sustainable energy. And investors themselves should go beyond shares and bonds, should gravitate towards alternative assets, such as real estate of course, but undoubtedly also alternatives such as infrastructure which also certainly have a role to play in the current context.