With all eyes on the Federal Reserve’s Federal Open Market Committee and an expected rate hike this week, it is easy to forget that there is a whole wide world out there with other nations and other central banks and other financial markets. It was just a year ago that the world was awash with sovereign debt that was magically trading with negative yields, meaning that bond investors actually lose money (or pay money) just to get their money back.

With a global recovery underway, the raw dollars worth of negative yields in sovereign debt has been on the decline. While U.S. interest rates in Treasury debt have pulled back down, it turns out that there has recently been a rise in the total negative yields of sovereign debt.

Fitch Ratings has issued a fresh report identifying that the amount of global negative-yielding sovereign debt outstanding rose substantially. This had been over $11 trillion a year ago, but it dropped to $8.6 trillion worth of negative sovereign debt yields as of March 1. Fitch released that May 31 levels on June 13, and that figure was back up to $9.5 trillion. What will be interesting is to see if the logic for having negative yields in more of a pro-growth world will continue.

Fitch noted that the reduction of political uncertainly related to the French election and a weaker U.S. dollar spurred the increase. As a result, the amount of negative-yielding sovereign debt outstanding in France rose to $1.0 trillion from about $750 billion on March 1.

Changes in the major issuers’ currency exchange rates accounted for about $400 billion of the increase in negative-yielding debt since March 1. But lower global yields contributed to the remaining $500 billion of the $900 billion increase.

Fitch further said:

The amount of negative-yielding debt had been declining since November of 2016, reaching a low among Fitch study periods in March of USD8.6 trillion. Higher yields have alleviated some pressure for investors, but challenges remain as yields in many developed economies are still near historic lows.

Many insurance companies and other buy-and-hold fixed-income investors have significant allocations to medium- and longer-term sovereign debt. As long-term sovereign debt matures, reinvested proceeds will generate far less income in major European countries. In Germany, for example, the 10-year sovereign yield was positive 31 basis points as of May 31. This is higher than its sub-zero yield in mid-2016, but much below the 4% coupon on a 10-year issue maturing in 2018.

There are several issues to consider ahead outside of what Fitch has addressed, and the verdict will not be known for some time. As stocks rise, if they keep rising, the investor appetite for sovereign debt may decrease, pushing yields up. Perhaps the biggest unknown is what will happen when all of the major central banks start to unwind the trillions of dollars on their balance sheets.

According to Yardeni Research, the most recent balance of total assets owned by central banks around the globe was roughly $18.4 trillion. These were broken down as follows (rounded):

• U.S. Federal Reserve: $4.4 trillion
• European Central Bank: $4.6 trillion
• Bank of China: $5.0 trillion
• Bank of Japan: $4.5 trillion

Another big consideration will revolve around Brexit. Theresa May’s gamble for a snap election almost backfired, and now there is more uncertainty about how the Brexit process will take place. Uncertainty often sends yields lower, and the United Kingdom is listed as the world’s 10th largest economy by gross domestic product in the CIA World Factbook.

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