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Bond Negative Interest Rate
Old 07-08-2019, 12:47 PM   #1
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Bond Negative Interest Rate

Educate me please ! Why would anyone buy a bond with a negative interest rate ?
https://www.france24.com/en/20190704...e=morning_brew
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Old 07-08-2019, 01:47 PM   #2
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Wouldn't be high on my list of priorities.
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Old 07-08-2019, 02:19 PM   #3
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More on the subject from this 2015 article.

https://www.swissbanking.org/en/serv...interest-rates
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Old 07-08-2019, 02:57 PM   #4
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Originally Posted by frayne View Post
Educate me please ! Why would anyone buy a bond with a negative interest rate ? ...
Generally, if they have no better choice... especially if you don't want to assume any risk and don't have access to deposit accounts like we do in the U.S.
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Old 07-08-2019, 04:11 PM   #5
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Generally, if they have no better choice... especially if you don't want to assume any risk and don't have access to deposit accounts like we do in the U.S.
Putting the dough in a safety deposit box isn't a better option? They don't have those in those countries? Gold isn't a better choice?
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Old 07-08-2019, 05:24 PM   #6
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frayne - you would buy a negative yielding bond if you believed that interest rates were going to be lowered even further (go more negative). In that case, the price of the bond will go higher, and you could sell for capital gains.

gerntz - depending on how much money you have, you may need a very large safe deposit box to hold it all. Then, how would you keep track of it all? Every time you want money you're going to have to make a trip to the bank, during banking hours, sign in, get the box and take your cash. It will take time no matter how you plan it. Contents of a safe deposit box are not insured. Lastly, the cash will experience loss of purchasing power due to inflation.
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Old 07-08-2019, 05:26 PM   #7
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Makes zero sense to me. Take the cash and stuff it in a vault, get a better return.
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Old 07-08-2019, 05:30 PM   #8
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Makes zero sense to me. Take the cash and stuff it in a vault, get a better return.
You may say that now, but I guarantee you, if/when the time comes, the vast majority of folks will bite the bullet and accept negative yields up to -1% without flinching, because the protection that the banking institution provides for your holdings will outweigh the cost of withdrawing it all and keeping it in a hard currency form.
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Old 07-08-2019, 05:34 PM   #9
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You may say that now, but I guarantee you, if/when the time comes, the vast majority of folks will bite the bullet and accept negative yields up to -1% without flinching, because the protection that the banking institution provides for your holdings will outweigh the cost of withdrawing it all and keeping it in a hard currency form.
Call me when the sky is falling. Until then, makes no sense.
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Old 07-08-2019, 05:36 PM   #10
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You may say that now, but I guarantee you, if/when the time comes, the vast majority of folks will bite the bullet and accept negative yields up to -1% without flinching, because the protection that the banking institution provides for your holdings will outweigh the cost of withdrawing it all and keeping it in a hard currency form.
What's the cost of keeping hard currency? Last I looked, my 200 pennies are still in the jar.
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Old 07-08-2019, 05:37 PM   #11
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we all know that banks and bonds are totally safe (look what's going on in Europe).
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Old 07-08-2019, 05:42 PM   #12
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What's the cost of keeping hard currency? Last I looked, my 200 pennies are still in the jar.
If your retirement savings consists of 200 pennies, more power to you.
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Old 07-08-2019, 05:44 PM   #13
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we all know that banks and bonds are totally safe (look what's going on in Europe).
There has never been any money ever lost in a FDIC insured account.
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Old 07-08-2019, 05:45 PM   #14
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There has never been any money ever lost in a FDIC insured account.
True, I was referencing the issues with Euro banks.
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Old 07-08-2019, 06:10 PM   #15
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Educate me please ! Why would anyone buy a bond with a negative interest rate ?
https://www.france24.com/en/20190704...e=morning_brew

They are a masochist?

They failed arithmetic?

They clicked buy on the wrong etf by accident?

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Old 07-08-2019, 06:15 PM   #16
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bonds with negative yields
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Old 07-08-2019, 08:04 PM   #17
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The purpose of negative interest rate is to discourage people from saving and put that money into the economy, a way to encourage/stimulate growth. Think of it as more a tax.
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Old 07-08-2019, 08:42 PM   #18
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I like that!

Spend the dough now and get full value or invest and see the value fall
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Old 07-09-2019, 04:04 AM   #19
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The purpose of negative interest rate is to discourage people from saving and put that money into the economy, a way to encourage/stimulate growth. Think of it as more a tax.
This is the reason.
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Old 07-09-2019, 10:57 AM   #20
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If your retirement savings consists of 200 pennies, more power to you.
He didn't mention that they were bright uncirculated 1909 S VDB pennies.
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