Can I interest you in a guaranteed loss-making investment?

(Jan 30, 2015)

Would you buy an investment which was guaranteed to lose you money?  This question was posed in a recent article in The Economist.  The author of the article was referring to the fact that short-term interest rates were negative in Japan, Germany and Switzerland.  This is not a recent anomaly either - Figure 1 shows that government bond yields in Switzerland have been below zero at short durations for several years now.

Figure 1. Yields by outstanding term for bonds issued by Swiss Confederation. Average annual yield curve 2012-2014.  Source: SNB.

Negative yields at short durations are one thing, but the ten-year Swiss government bond yield went negative in mid-January 2015, and it is still negative at the time…

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Tags: yield curve, interest rate, Strafzinsen

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