Negative yields will spread to the Australian market, predicts T. Rowe Price's most senior bond fund manager, because Australian yields today do not look that different from Germany's 11 years ago or Japan's 21 years ago, and "look where they are now".
Arif Husain, head of international fixed income at the $US765 billion ($1.06 trillion) asset manager, believes interest rates for the most part are going "lower for longer" and emerging markets are just starting their own deleveraging cycle that originated in the US in 2008 and Europe in 2011. That means saving, not spending. 
"We all know that when you emerge and you become middle-class, you get middle-class problems like paying a mortgage, paying off your credit cards," he said on a visit to Sydney on Wednesday. "The big exception is China, that hasn't happened - yet. I would say it's inevitable."
An estimated $US7 trillion of bonds are trading at negative interest rates, according to T. Rowe. Australian Commonwealth government bonds hit a record low 2.2 per cent last week.
"Australia is different, right? I was in Germany five years ago, they said they were different. Now look at that, they're pretty much like Japan," Mr Husain said. "This is not a prediction but it's certainly a warning. I would not be surprised to see negative yields in Australia at some point ... Negative yields, central bank policy, it's bad, it's bad for our clients, it's hard to earn yield. For me, as an active manager of bonds, it's actually kind of interesting." In 2015 there were 77 rate cuts and 66 rate rises.
Negative yields might be five years away for Australia, he estimated in an earlier interview. "You have triggers in parts of the world," meaning China, "that could send the deleveraging through your market," he said.
"There's a very dangerous game going on between central banks, markets and the real economy. There should be a symbiotic relationship where economics drive central banks which drive markets, and they work together. They each dominate each other at various times.
"It's like paper-scissors-stone where the central banks think they can win on every occasion. Central banks are in this uneasy, unnatural state of affairs and markets always win. They will do the thing that hurts the most people."
Mr Husain urged investors to think about why they held bonds and whether their exposures still met those needs, being income, stability - "we're fixed income guys, we should never be the ones to provide our clients with bad news" - and diversity from equities.
To get around this required "something a little bit different". T. Rowe favours countries with central banks cutting rates or at least holding them stable, and even more so when that comes with an economy over-represented by pension funds and insurers willing to buy those bonds, which reduces volatility.
One of his stable positions is investing in triple-A rated Swedish covered bonds, but hedged back in Australian dollars, where he can earn better yield than similarly triple-A rated Australian debt. This gets him between 2.5 per cent and 3 per cent for a four-year government bond. In Sweden, the nominal yield is only about one-quarter of 1 per cent. Plus, Sweden is doing quantitative easing, so there is a ready buyer of its debt who is not sensitive to price: the Riksbank.
His return-seeking position is Serbia, home to the most attractive inflation-adjusted yields anywhere in the world. Serbia's status as a European Union candidate means it is not yet part of the 28-member union and it does not have to participate in sanctions against Russia and the EU.
It is also emerging as a manufacturing hub for Japanese and German companies, given its proximity to Germany and Russia, making Mr Husain bullish on Serbia's "really, really attractive" growth. "Today inflation in Serbia is only 0.6 per cent but I'm still getting a 6 per cent yield. That's pretty attractive, right? Nowhere else in the world can you get inflation-adjusted yields like this ... it's a great opportunity."
His defensive idea is buying Lloyd's protection, because if Britain votes to leave the EU, "we're going to make a lot of money" and the position costs him "almost nothing".
T. Rowe's dynamic global bond fund returned 8.5 per cent last year.
Meanwhile, the asset manager's global equity portfolio manager, Scott Berg, said too many people were trying to find simple answers to complicated things, such as "is China good or bad?"
He also observed that people were too anchored to how cheap valuations got during the crisis, and even though the world has moved on, "global equities look pretty good".