Why does Anyone Buy Negative Interest Bonds?

Discussion in 'Stock Market' started by william the wie, Jul 4, 2019.

  1. william the wie
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    william the wie Gold Member

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    This is something I cannot make sense out of. So, have at it.
     
  2. HenryBHough
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    HenryBHough Gold Member Supporting Member

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    One thing:

    Stupidity.

    That's why negative interest bonds are all the rage with liberals.
     
  3. Dekster
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    Dekster Gold Member

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    The two biggest reasons are that they have to hold them because of government regulations or because they think the economy is turning south and it is a safe place to put money to mitigate loss.
     
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  4. boedicca
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    boedicca Uppity Water Nymph Supporting Member

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    And if cash is outlawed....as is happening in Europe.
     
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  5. Dekster
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    Dekster Gold Member

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    It was really more done in Japan and parts of Europe to try to keep people from parking their money in banks for very long. Banks park their money in central banks, so negative interest tries to shake the money back into circulation. Both places risk stagflation.
     
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  6. justinacolmena
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    justinacolmena Senior Member

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    Why invest in negative interest bonds?

    It's other people's money.

    Sometimes trust or endowment funds or the like *must* be invested according to some institutional mission or mandate despite what would seem to us as ordinary common-sense rules of sanity.
     
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  7. Cellblock2429
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    Cellblock2429 Gold Member Gold Supporting Member Supporting Member

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    /----/
    Why Would Anyone Buy Negative Interest Rate Bonds? -- The Motley Fool
    ...you're asking why do people do this, because they are doing it. And to try to answer the question briefly here, as we close, the answer is that traditionally, bonds are kind of an offset to the stock market. The reason some people think you should be diversified into bonds is because when stocks go down, bonds often don't. And so if you are a large asset manager, and you're trying to park lots of cash different ways and keep yourself safe and balanced, then you have appreciated having something that protects you in the one out of three years where the stock market loses value.

    BTW Swiss bank accounts pay negative interest too. It’s the cost of hiding money.
     
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    Last edited: Jul 4, 2019
  8. william the wie
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    william the wie Gold Member

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    Japan is already in stagnation and parts of Europe as well. A decent case can be made that parts of China are too. If Trump can get most of his agenda enacted the US may missout on this problem.
     
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  9. william the wie
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    william the wie Gold Member

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    I can see how low yield bond substitutes such as REITs and Utilities would work but since many DRIPs of these issues often provide discounts on direct and reinvested dividend purchases that looks like it provides much more down side protection than negative interest rate bonds.
     
  10. Dekster
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    Dekster Gold Member

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    I support stagnation. In fact, I support purposeful, managed degrowth. America consumes too much. The pursuit of more dollars to pay for too much is ruining people's psyche.
     
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