The ZYNY world—or zero-yield to negative-yield—is set to drive another wave of yield chasers in the markets, JPMorgan said.
"[ZYNY] cannot be separated from what is pushing these yields to zero," JPMorgan said in a note Friday. "QE (quantitative easing) buying by central banks is the proximate cause, but is in turn motivated by the growth disappointments, falling inflation, and the fear of deflation," it said.
The number of bonds and bond markets with near-zero or negative yields is rising, JPMorgan said, noting that around $3.6 trillion worth of developed market government bonds—or 16 percent of its Global Bond Index—was at a negative yield two weeks ago.
Read More Roubini: Why QE isn't working
"Zero yields on safe government debt pushes the search for yield into hyper drive, swamping local fundamentals," JPMorgan said. "Term premia, liquidity premia, and volatility premia are all under pressure."
It expects yield spreads across countries will tighten, with countries with steeper curves getting bought by investors in countries with flatter curves. As QE won't have much impact on bond yields in countries where those yields already close to zero, investors will likely seek out better yields in non-QE countries, it said.