I’ll Pay You to Hold My Money

Why would an investor pay a central bank to hold their money?  There are only two reasons I can think of.  One, you are speculating that another investor will come along and pay a higher price to buy the bonds from you (current European Union Central Bank scenario) or two, you are seeking safety in a very unstable environment where your only concern is the return of your principal.

Today’s negative yields are the manifestation of central bank policy pushed to an extreme.

Germany sold two-year government debt at a record low yield of minus 0.38 per cent on Wednesday, in a move reflecting expectations of further monetary easing for the eurozone next month. The policy-sensitive two-year bond offers a coupon of zero,

Source: Germany sells debt at record low yield – FT.com

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