system
A chat on subreddit /r/wallstreetbets
human
Can someone explain why someone would buy negative yielding bonds? Unless I’m misinterpreting what that means lol
gpt

There is a currency component - the yield on an instrument may be less than yield on comparable us treasuries or other risk free assets because of market expectations about relative changes in currency valuations over the life of the instrument. After hedging the currency effects over the relevant period, the return of, e.g., a German govt bond is typically comparable to US treasuries, even if the yield appears to be wildly different at face value.

There are lots of other interrelated reasons, too.

Lots of institutional investors have a mandate to buy bonds meeting specific criteria regardless of yield, so there is a large yield-insensitive base of buyers creating persistent demand.

Lots of the buyers were central banks looking to implement monetary policy, not seeking return on investment.

Speculators looking to benefit from price appreciation if yields fell further could rationally buy negative yield bonds.

You can’t get FDIC insurance on 100 billion dollars of cash, so if you are an insurance company or something like that, you can’t just put money in a bank account and you do actually need to buy bonds, so yield is sometimes a tertiary concern.