with the box. you get your money back. with the bond to have to keep it to maturity to do that if negative rates rise even higher.
For the first time, you’ll will have to pay Germany to own its 5-year bund
- Thread starter Banjo
- Start date
True. And I realized that I'm still the owner of my money using a box. Quite a different matter when owner of a debt. Slow brain 
Hmmmm, there appears to be very scant understanding of bonds here...
gotcha.
You're right Martinghoul. I'm newbie and that was from a legal point of view. I swear I would try my best to get a better understanding of bonds. Sorry.
You let an anonymous internet people determine your trading?
Wow. And I laugh at CNBC fans.
Geez dude. One upon a time I thought you were the real deal.
Last edited:
Of course... My "anonymous internet people" strategy has been delivering stupendous returns for investors for 20 years.
And no, don't believe you about laughing at CNBC fans. Maybe a while back, when you still had your sense of humour, but clearly not now.
How do negative interest rates work? Serious question.
Do you buy a bond at 110 and get paid out 100? Or is it a tax on banks who don't lend out their money?
Well, basically, it's a little bit of all of those things. With bonds, yes, you might buy a zero-coupon bond at 110 and get 100 at redemption (doesn't necessarily mean you lose money, since, in the meantime, you might be able to fund the bond at an even more negative rate or you might have disinflation or smth).
In general, there's nothing special about zero, so negative rates work the same way as positive ones do, with the a caveat around physical cash. How it all works? It's a little complicated, but if you wanna read a nice note on the subject written by the Bank of England, you can find it here: http://www.bankofengland.co.uk/publications/Documents/other/treasurycommittee/ir/tsc160513.pdf
A 10-year note with 0 coupon sells at 100. To have negative yields you pay 110 for example with 0 coupon rate and you get 100 at maturity. You pay the government to finance their social welfare programs of millions who prefer to get paid and do noting, a rising trend. Take your money to a legitimate state. This is a trick to finance welfare. You are paying for someone to live on your money while you work your as* off.