By Dhara Ranasinghe
LONDON (Reuters) - The pool of euro zone government bonds with negative yields on the Tradeweb platform rose in January to a nine-month high at almost 40 percent, the latest sign that a weak economy is driving borrowing costs down as investors bet on more stimulus.
Bond yields across major developed markets have fallen sharply in recent weeks on the back of weak economic data and dovish central bank commentary.
The U.S. Federal Reserve last week signalled that its three-year interest rate hiking campaign may be at an end given a cloudy economic outlook, and the European Central Bank last month downgraded its growth outlook on weak trade and waning confidence.
As investors flock to fixed income, the pool of bonds with sub-zero yields is rising again. That effectively means investors are willing to pay some governments for holding their debt -- for instance, German government bonds out to a maturity of nine years now have yields below zero, Refinitiv data shows.
Tradeweb data released on Monday showed that of around the 7.50 trillion euros of euro government bonds in its system, about 2.98 trillion euros, or almost 40 percent, yield less than zero. That compared with almost 37 percent in December and was the largest share since April last year.
The pool of government bonds with negative yields in the euro area hit a peak of around 60 percent in 2016 -- the year the ECB ramped up its stimulus measures to stave off the threat of deflation.
(Graphic: Pool of negative yielding euro zone govt bonds png link: https://tmsnrt.rs/2OAjRHh).
Monday's Tradeweb data also showed around 22 percent of euro zone government bonds yield less than the ECB's deposit rate of minus 0.40 percent. That was little changed from December.
Tradeweb's data is based on statistics as of the end of January.
"There's been a reassessment of global growth conditions and we've seen central banks turn more dovish and that has affected pricing in bond markets," said Vatsala Datta, a rates strategist at RBC Capital Markets.
"Until we see the data turn, it is too soon to say where we are heading in terms of bond markets and central bank monetary policy."
(Graphic: Swathe of German bond curve yields sub-zero link: https://tmsnrt.rs/2BlitAD).
(Reporting by Dhara Ranasinghe, Editing by xxx)