Investors are going bonkers for bonds
In a further sign of the mania gripping the bond market, Germany issued €3.15bn of zero-interest ten-year bonds last week.
Germany has sold a tranche of bonds that pay no interest, reports Adam Samson in the Financial Times. In a further sign of the mania gripping the bond market, Berlin issued €3.15bn of "zero-coupon" ten-year debt last week.
So investors are willing to miss out on annual interest payments to hold German paper, considered Europe's safest asset. The auction finished with a negative yield of 0.26%, meaning that buyers would lock in a small loss if they held the paper until maturity. This is the second time that Germany has managed to issue such zero-coupon debt.
Worldwide, more than £10trn-worth of government and some corporate bonds are now trading on a negative yield. The phenomenon is underpinned by quantitative-easing policies from central banks that have seen them buy up trillions of dollars of debt, regardless of the price.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The US Federal Reserve, for instance, owns $2.1trn in Treasury bonds. The mania for bonds means that more than a dozen supposedly high-risk corporate junk bonds are trading in Europe on a negative yield, notes Paul Davies in The Wall Street Journal. "Ultra-loose monetary policies have turned debt investing into a choice about how to lose the least amount of money."
Many will still be hoping for a profit, of course. The German ten-year bond, for example, has traded on yields as low as 0.40% this month. Those who bought the asset on a negative yield may still realise a capital gain so long as they can sell it on at a higher price to a "greater fool" willing to take on an even worse rate of return.
Investors are betting that central-bank activism has abolished risk, says Robert Burgess on Bloomberg. Yields on two-year Italian debt fell below 0% this month. This in a country "on the verge of fiscal crisis" barely a month ago. "Logic has been suspended."
-
Who is the richest person in the world?
The top five richest people in the world have a combined net worth of $825 billion. Who takes the crown for the richest person in the world?
By Vaishali Varu Published
-
Top 10 stocks with highest growth over past decade - from Nvidia, Microsoft to Netflix, which companies made you the most money?
We reveal the 10 global companies with the biggest returns since 2013. One firm has posted an astonishing 9,870% return, meaning a £1,000 investment would now be worth almost £82,000.
By Ruth Emery Published