The German ten-year yields negative 0.56%, part of the world’s $15 trillion stock of negative-yielding debt, and that just sounds wrong. You give them your hard-earned money, and after a decade of waiting, you end up with… less than you started with. To anyone who grew up in the halcyon days of mostly positive interest rates, this just sounds weird. And yet, people do it: investors buy Bunds, JGBs, and Swiss government bonds despite negative yields.
Let’s talk about why.