Some $14 trillion in government debt now offers negative yields and the U.S. could soon be a part of that legion, according to Joachim Fels, a global economic adviser for Pimco.

In a blog post dated Aug. 6, the adviser said escalating trade tensions between the U.S. and China could be a spark for U.S. Treasurys slipping to rates that are less than zero.

“And if trade tensions keep escalating, bond markets may move in that direction faster than many investors think,” Fels warned.

Trillions of dollars in sovereign debt — $14 trillion by Pimco’s estimate, a figure others put closer to $15 trillion (paywall) — bears a negative yield, which means that investors get back less than their original investments for the privilege and perceived safety of owning government-backed debt.

The negative-yield dynamic in the market has proliferated after more than a decade of monetary-policy unorthodoxy intended to juice stubbornly low inflation and anemic growth in Europe and parts of Asia.

However, Fels says that central banks aren’t the villains but the victims of deeper fundamental drivers.

“The two most important secular drivers are demographics and technology. Rising life expectancy increases desired saving while new technologies are capital-saving and are becoming cheaper—and thus reduce ex ante demand for investment. The resulting savings glut tends to push the ‘natural’ rate of interest lower and lower,” he wrote.

The Pimco adviser speculates that the Federal Reserve’s rate late last month, described as a “mid-cycle adjustment” and not the start of a series of cuts, may indeed be the start of a fresh round of easing that could drive U.S. debt markedly lower.

“But if the Fed cuts rates all the way back down to zero and restarts quantitative easing, negative yields on U.S. Treasuries could swiftly change from theory to reality,” Fels said.

The market is pricing in a 100% chance of a rate cut at the rate-setting Federal Open Market Committee’s next meeting gathering next month. The chance of 50-basis-point cut stands at 19%, while those for a quarter-point cut is at more than 80% based on federal-funds futures, according to CME Group data.

Presently, the 10-year Treasury note yield

TMUBMUSD10Y, -4.83%,

which falls as prices for the debt rise, was at 1.649%, hanging around its lowest level in 2016.

The slump in U.S. government yields comes as the Dow Jones Industrial Average

DJIA, +1.21%

and the S&P 500 index

SPX, +1.30%,

and equity indexes throughout the rest of the globe, were attempting to recover from brutal losses accumulated on Monday after China’s yuan breached a psychologically significant level at 7, indicating to some that a Beijing-Washington trade dispute had escalated to a possible currency war, with severe implications for the global economy.

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