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Germany, yesterday, issued a 30-year bond that offers negative yield (average yield of -0.11%).
This typically means that investors are paying German government to hold their debt. Why would investors invest in such a bond? Thread 1/8
This typically means that investors are paying German government to hold their debt. Why would investors invest in such a bond? Thread 1/8
The coupon set on these bonds (or Bunds, as they are called in Germany) is 0% i.e. the government will not pay any interest at all on these bonds.
In comparison, if GoI issues a 30 year bond today, the interest rate offered would be ~7%. 2/8
In comparison, if GoI issues a 30 year bond today, the interest rate offered would be ~7%. 2/8
A negative yield of -0.11% means that an investor in this bond will pay 11 basis points per year to German Govt to borrow the sum i.e. an investment of Rs. 100 in these bonds would yield ~Rs. 97 in 30 years, a loss of ~Rs. 3. 3/8
