Why would anyone buy a bond with a negative yield?
In: Economics
Lots of reasons:
1. you’re buying _your own_ bond. Most bonds require a liquidity level in the issuer to match obligation out there, and buy buying back they can decrease the liquidity level required.
2. they may be effectively trading _currency_ – e.g. they currency it’s issue in is going to change in value so the very small loss in bond yield is made up for in currency change (relative to some other currency).
3. They may believe they are entering a period of probably loss in portfolio value but think the most secure place for their money is in a bond that has a very predictable, but reliable loss. E.G. if you believe a market is going to tank by 15%, then finding the strategy that loses 0.5% is _really, really good_.
Latest Answers