Today at the global level, the total amount of bonds with negative yields has risen to nearly $ trillion; implying that nearly a third of AE government bonds trade at negative yields. Equity premium has crossed 4 per cent, which is 1 standard deviation higher than its long-term average.
Return to lower interest rates in AEs poses challenges as leverage has already built up in the EMEs and the needed deleveraging is not complete in many European economies. Amid low global interest rates, total credit to the nonfinancial sector in the EMEs went up from 107.2 per cent of GDP at the end of 2008 to 194.