Negative Interest Rates have now hit 5-year German bonds! (2015, buy, sell)

[ncole1]

5-year bonds in Germany are now paying a nominal yield of -0.08%!

Investors pay to lend Germany money now - Feb. 25, 2015

[Opin_Yunated]

Germany is running a scam operation. What do you expect?

[mathjak107]

return of capital is becoming far more important in certain currency's than return on capital.

[Lowexpectations]

Originally Posted by mathjak107

return of capital is becoming far more important in certain currency's than return on capital.

Return of cap has become more important than return of cap?

[mathjak107]

Return of capital has become more important than return on captial in many countries today.
If you are the bank of Greece you need a country and currency to store a few billion bucks in that won't depreciate as fast as it will if you hold it in your own.

Germany at a slightly negative rate is a better deal for them as an example

[Lowexpectations]

Originally Posted by mathjak107

Return of capital has become more important than return on captial in many countries today.
If you are the bank of Greece you need a country and currency to store a few billion bucks in that won't depreciate as fast as it will if you hold it in your own.

Germany at a slightly negative rate is a better deal for them as an example

I missed the on/of I thought it read on in both instances

[caverunner17]

So you're paying to have a bond? Why would anyone do that?

[mathjak107]

Where does a country like greece take 10 billion dollars that they do not want to keep in their own depreciating currency and buy a cd ?

answer ---no where , they need to buy bonds with that much money.


now figure in the fact they do not want to loose their shirt buying bonds in a super strong currency like ours.


Answer- you give up a little bit and buy bonds from some these negative rate countries that are healthy enough that your money is safe yet not so strong that you lose 30% to currency devaluation.

[sojourner77]

Originally Posted by Lowexpectations

Return of cap has become more important than return of cap?

Return of capital. I suspect it was tongue-in-cheek.

[JayGatsby]

Originally Posted by caverunner17

So you're paying to have a bond? Why would anyone do that?

There are a couple possible motivations for this...

1. Preservation of capital- everyone knows Germany won't default so owning their bonds is a pretty safe bet you'll get your money back. If you've got a lot of money you don't really want to hold it in cash and it isn't 100% safe in European banks.

2. Possible capital gains- if the interest rate becomes more negative you can sell your bonds for a capital gain. This is likely the motivation of many/most of the people buying negative yielding bonds.

3. Positive real yield?- it is debatable what the real yield will be when you factor in inflation/deflation. If there is some deflation then the negative nominal yield turns into a positive real yield.