Stand aside – this bond bubble will blow

Investors are paying governments for the privilege of lending them money. That may make sense to some – but we won’t be following them, says John Stepek.

This week, Germany made financial history. It sold a five-year government bond (bund) at a negative yield for the first time. It's not the first country to do so Finland had already achieved this particular feat but as the Financial Times points out, the market for German bunds is one of the biggest sovereign bond markets in the world.

Investors who bid for these at auction are paying the German government 0.08% a year for the privilege of lending to it. If held to maturity in 2020, these bonds will pay back less than was borrowed.

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John Stepek

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.