Some of the negative nominal premium comes from the fact that you need these govt. securities for collateral, REPOs, clearinghouse margin, etc.
That doesn’t explain the change, but this point is often overlooked and it makes the puzzle somewhat less mysterious.
In part, negative nominal (and real) rates reflect a scarcity of good opportunities at the margin, but of course inframarginal opportunities may be fine.
If you wish to try a further de-weirding of this, it may reflect a truth about agency problems rather than absolute pessimism.
If capital is relatively plentiful, and talent is super-scarce, and you don’t know how to find marginal talent, you may be stuck just storing your money. But when talent and liquidity are combined — say Mark Zuckerberg — it will earn phenomenal returns, the other side of the coin.
In other words, this may all be a kind of correlate to income inequality and massive returns for founders…
…you have extra money, you really would like to lend it out for a real productive investment, rather than storing it at slightly negative nominal interest. [savings glut, a’la Softbank]
But whom to trust? Who is your local Mark Zuckerberg? You just don’t know. The uncle you might give it to will just rip you off and he is a dope anyway. [tech talent harder to spot because you can’t rely on traditional credentials]
If the agency wedge is larger, because the talented are already occupied for the most part, you might just have to store it.
This implies mega-returns for good talent spotters, which in fact we observe as of late.