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Rates.

"...About a third of the world’s trade-able bonds now have negative yields..."
Why are negative-rate bonds even created or printed in the first place? This is just too weird, like the Three Wise Men running out of the manger, screaming: "It's a girl! It's a GIRL!" ..... Or, like The Emperor's New Clothes---when we all know he's not wearing any clothes. A bond with a negative yield is actually something OTHER than a BOND. Like making love to Kate Upton. But then, you wake up. REALLY crestfallen.
https://www.cnbc.com/2019/08/21/trump-likes-german-sale-of-negative-yield-debt-but-it-didnt-go-well.html

Comments

  • edited August 22
    I don’t get this -
    - buyers were willing to pay more than face value for these German 30 yr zero coupon. But there were only enough buyers for 40% of the bonds. How could there have been no buyers willing to pay 95% or 90% ? As I say about Greenland - at some price, everything is for sale.
    From the article:
    ““This is the most significant I’ve seen in terms of a failed 30-year. For the Bundesbank to take 60% is unprecedented. There was no demand for 30-year paper at negative interest rates. They only could sell about 40% of it. A real investor can’t make pension payments based on negative interest rates,” he said.
  • You ain't the only one.
  • edited August 23
    I'm thinking ... Makes me wonder? ... Who would issue a negative yielding bond in the first place? Perhaps, the government? In this way, there is little to no interest expense. Now, Who would buy this? Perhaps, the government? Seems, to me, in general, that investors would want a return to lock up their money either through capital appreciation along with interest payments and/or some combination of both. With zero or negative yielding bonds there would have to be a great deal of capital appreciation. And, with a negative yielding bond competing against one with a good yield I know where I'd put my money.

    Ah yes ... Now ... I get it. That is why there is currently such strong demand for US Treasury bonds as they have yield associated with them where the German bonds don't. No wonder they can't sell those things. Woe is Germany! And, perhaps the Euro Zone as well.

    As my late father use to say ... When the yields get thin it is time to trim" (get defensive). And, I have.
  • That is one reason Japan is the largest holder of US Treasury for many years. Japan government bonds have yield less than 1% since 2000.
    Can't imagine how their retirees depends on their government bonds.

    China is another large holder of US Treasury. This may change as the trade war lingers on.
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