Title: Negative bond yields - definition and explanation - Economics Help
Headings: Negative bond yields – definition and explanation
Negative bond yields – definition and explanation
Why would people buy negative bonds?
What at the implications of negative bond yields?
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Content: As part of a diversified investment plan, pension funds and investment trusts may wish to keep a % of their funds in government bonds to maintain a certain reserve. Similarly commercial banks may need to hold gilts to maintain reserve ratios. Quantitative easing. Central Banks may be buying bonds as part of a quantitative easing programme and therefore there is an unusually high demand for bonds. Still make profit from currency swings. Japan has negative bond yields, but foreign investors may be able to make profit from the rising value of the Yen. The bond itself may lose money, buy if the Yen increases in value compared to the Euro. Euro investors make money from holding Yen – and government bonds are one of the easiest ways of holding foreign assets. See: Yen carry trade
Deflation.