Funny things happen in math when you work with very small numbers very close to zero and, since bond yields have been in that range for some time now but have recently been heading higher, the financial media is fascinated by this, either because they’re bored with what’s going on in the world and are amusing themselves in any way they can or they simply don’t understand that this sort of math is just silly (granted, it’s not silly if you bought European bonds two months ago and now want to sell, but that’s not the point here).
A good example of this kind of silly math is to calculate a P/E ratio for a stock with infinitesimally small (but non-zero) earnings where the result is an unusually large number – say, a P/E of 10,200. Of course if you had divided by zero (which is, effectively what you’re doing here), you get something like #DIV/O! or “Cannot divide by zero”, but this doesn’t stop people from doing it when it’s not zero, but very close to zero.
Anyway, the recent ascent of bond yields in general and German bond yields in particular has attracted quite a bit of attention lately for reasons that should be obvious when looking at the chart below via investing.com.
Any time you get this big of a move away from zero, all kinds of crazy math results such as that contained in German Bond Investors Just Lost 25 Years of Yield in 14 Days at Bloomberg and people are just fascinated by it.