Posted on 02/25/2015 4:05:28 PM PST by Mariner
Germany has sold five-year debt at a negative yield for the first time, as investors paid for the privilege of lending to one of the world’s biggest economies. The sale shows how central bank policy is pushing markets ever deeper into uncharted territory, more than six years after the financial crisis.
Policy makers previously worried that negative interest rates might cause markets to malfunction —but that has not happened so far. Negative yielding bonds mean investors pay more than the face value of a bond plus interest payments, accepting a guaranteed loss if they hold it to maturity.
(Excerpt) Read more at ft.com ...
Me no get.
Who buys it?
They sold it, who would buy it?
Heck of an investment here.
Linky no worky without sign up. PASS. Mods delete please.
People who buy must banking on deflation.
Or financial collapse.
Yes.
Large institutional investors believe investing in the Germanic Nations is the safest bet around.
After all, they could get 1-2% is short term US Treasuries and there's a limitless amount of them for sale.
This implies deflation is not only certain, but probably underway.
Debt deflation. The real insidious one.
if it’s a guaranteed loss win no possibility of any growth of return, please don’t call it an investment. Word doesn’t apply. Thank u.
Mattress better. No loss
——accepting a guaranteed loss if they hold it to maturity.——
when the Euro devalues they will make money
Wouldn't it be the opposite?
They’d make more putting their money in a mattress
Me neither. Why are people willing to accept negative return on investment while the price of food rises weekly? It makes no sense.What do they know that we don't?
one article seemed to imply that once bonds go even further negative they could sell them for a profit. seems cash would be even better. so me no comprende.
And what retard would pay to loan the government money?
This makes no sense but there’s been alot going on the last few years that don’t make any sense. Does anyone know if there is anything in place that prevents our own Treasury from buying these boat anchors?
http://www.theglobeandmail.com/globe-investor/investor-education/who-would-buy-a-bond-with-a-negative-yield/article23132250/
•Risk-averse investors might accept a negative yield as a sort of insurance premium to keep their money in a relatively safe and liquid debt instrument, as opposed to in a shaky bank.
•In a deflationary environment, the real – or inflation-adjusted – return on a bond with negative nominal interest could still be positive. For example, if a bond is yielding negative 1 per cent, but the consumer price index falls by 2 per cent, the investor’s purchasing power would still increase.
•If yields fall further into negative territory, the investor could make a capital gain because the price of the bond – which moves in the opposite direction to the yield – would rise.
•The investor might be speculating that the currency in which the bond is denominated will rise.
•The buyer of the bond could be an insurance company or pension fund that is required to purchase certain types of relatively safe assets, regardless of their yield.
It’s all over my pay grade...
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