bonds with negative yields

[GrayHare]

Negative yielding bonds, such as the German 10 year Bund, have been around this decade. My understanding is there are buyers at negative yields because various agreements, such as those of pension funds, require the purchaser keep a certain % invested in bonds. Is that the only reason? Otherwise, why not simply keep the money in cash, assuming the cash is not being devalued?

 

[DrRoy]

It is typically large institutions that cannot manage the amounts safely as cash. Would cost more to guard it.

 

[clobber]

Timely - I think you should read this: https://portfoliocharts.com/2019/05/27/high-profits-at-low-rates-the-benefits-of-bond-convexity/

The takeaway is that there can be significant gains due to capital appreciation. The largest gains can come when the purchased interest rate is quite low (and negative), and then the interest rate changes even just a little.