Going negative

(Oct 24, 2020)

In the past I have occasionally written about the oddity that is a negative yield.  At that time, very short-term yields on Swiss government debt were negative.  Since then the negative-yield phenomenon has only spread further - Table 1 shows that the yields on German government bonds were negative all the way out to 30 years.  Your eyes do not deceive you: you pay 101.42 now for a bond repaying 100 in two years, losing 1.42 if you hold the bond to redemption.

Table 1. Yields on German bunds. Source: Bloomberg, accessed on 12th October 2020.

Term
(years)
Price Yield
2   101.42 -0.74%
5   103.79 -0.74%
10   105.53 -0.55%
30   103.62 -0.12%

Short-term government-bond yields in the U.K. are only just negative (-0.04%

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Tags: annuities, PRA

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