How Negative Yields Work | WSJ

Negative yields are occurring with greater frequency in global bond markets. What generates negative yields and why do investors continue to buy these money-losing bonds?

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[gordokdestroyerofworlds]

The only bond that won't go negative is your credit card's interest rate ;)

[markplain]

WSJ needs to do a follow up on this video and provide more clarity

[thuglifebear]

I don't see how any Bank product with a minus sign in front of it could possibly be a good idea.

[zurvey]

WSJ's YT channel is one of the very best on YT. I'm so glad they do these.

[Gabriel-fbet]

This video asserts that negative rates incentives investors to buy bonds instead of park their money in a bank (2:45) but this makes no sense and doesn't explain why anyone is buying these bonds.

Their rationale seems to be equivalent to a greater fool argument. Bonds will become even more negative so let's buy them now to sell them to suckers later. This doesn't seem to be very rational to me and I have a hard time believing that $16T of assets would get tied up in such stupidity.

I suspect the real answer has something to do with governments/ central banks forcing banks to buy these bad assets. Or Maybe pension funds with rules that force them to buy bonds and the rule-makers never considered negative-yielding bonds would come about. Or something like that.

That said I really have no idea and would love for someone who understands to explain this to me.

[vaibhavk]

Sounds like this has the potential to repeat 2008.

[BuffDemigod]

"Negative rates give investors an incentive to buy bonds rather than park their money at a bank."


Really? Explain how that works, please? I am incentivized to pay money to forego the use of my money until a later time? You believe this? There are literally 10 million better uses of my money than buying bonds that I have to pay interest on rather than receive interest on. Are you people on drugs? Don't answer that.

[jasmines]

I wish I understood financial concepts better. Its important to know to be a productive person in society.. I don't understand why financial knowledge is not taught in schools as a basic skill when everything is tied to money and economy...

[jaycesqousin]

How can a yield go negative just from excess demand? If coupon payments are made then yield will always be above zero or close to zero but how can it be negative?
Is it negative because it includes inflation into the calculation of the yield?

[heavyizthacrown-]

This video was good, but didn’t quite explain *clearly* why negative yield is bad for the bond holder. If I hold a bond purchased at $100 and my yield is (negative) $96 (totaling a $196 return), do I really have a problem?

[momoi]

I love how WSJ took what NPR's Planet Money podcast covered in it's most recent episode and turned it into a highly visual video.

[ratgreen]

I'm not sure I really understand, Its like buying a loan as an item for $1000, and having to pay back $1050. Because in the future that loan as an item might be worth $1100?

[OKanoby]

Gold, silver, cryptocurrencies heck even some multiplex real estate investments are better than keeping your money in the bank right now

[welm]

One reason why investors would buy a negative yield bond is to lower risk of loss or hedge against taxes and currency exchange rates.

[MultiMobCast]

Negative rates are not only caused by higher demand in the market. Countries like Germany also use it as a form of economic intervention to produce a desired result.

[johanbendiksen]

Bruh can you have a format that you didn't steal from Vox

[alotanacs]

2:43. These negative rates don't trickle down to the deposit holder at a commercial bank. So why would they feel the need to pull out their money? And even if they do, they can just stuff it under their mattress. It doesn't really encourage them to spend.
2:15. Secondly, why would commercial banks lend out their money just because ECB has negative interest rates? Why not just deposit that money at a different private bank that doesn't charge you for holding your money?

[ericanderson]

I buy negative yielding bonds because I can sell them for a profit in the future? Did you say that? Wouldn't that be a Ponzi scheme?

[kevinkang]

Buy bonds sell when it’s negative yield and profit

[raybod]

Negative yields mean there's too much money being produced and there's a lack of demand for money on a macroeconomic scale. It means your country's economy is screwed. The big borrowers are not borrowing because they don't feel confident in investing, even at a low interest rates. The little borrowers can't borrow because they are seen as a risk because the outlook on the economy looks bad and they have a higher chance at going under, so their interest rates are too high to make borrowing affordable. The next stage is stagnation, possibly stagnation with inflation or eventually hyperinflation because people completely lose faith in their money.