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In January 2020, prior to the onset of the global coronavirus (COVID-19) pandemic, three of the seven largest economies by GDP had negative yields for two-year government bonds (Japan, Germany, and France). With the onset of the pandemic, two-year bond yields in these countries actually rose slightly in contrast to the other major economies, where yields fell over this period.

As of May 2026, yields for two-year government bonds exhibited fluctuations across all countries. Notably, Japan showed a continued upward trend, reaching 1.39 percent. While India experienced a yield of 6.42 percent, China recorded a modest yield of 1.28 percent.

Negative yields assume that investors lack confidence in economic growth, meaning many investments (such as stocks) may lose value. Therefore, it is preferable to take a small loss on government debt that carries almost no risk to the investor than risk a larger loss on other investments. As both the yen and euro are considered very safe assets, Japanese, German, and French bonds were already being held by many investors before the pandemic as a hedge against economic downturn. Therefore, with the announcement of fiscal responses to the pandemic by many governments around March 2020, the value of these assets rose as confidence increased (slightly) that the worst case may be avoided. At the same time, yields on bonds with a higher return fell, as investors sought out investments with a higher return that were still considered safe.