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?
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...
It means the banking system has high risk and if you are a holder of cash it is cheaper and safer to give it to the government of germany than to put it in a safe deposit box at a bank, or worse deposit it with a bank.
Think of it another way if you had 500 million dollars where would you put it? A normal bank account only insures up to maybe 100 or 200k dollars. You would need like 500 bank accounts at different banks to insure all that money. Or you could drop the whole sum off with the German government and take a small loss. But you would have the full backing of a major economic power.
You can certainly drop the whole thing off at Charles Schwab. But if anything happens to Charles Schwab there goes your money. So it's all about how much risk do you want to take?