For the first time, you’ll will have to pay Germany to own its 5-year bund

Sergio77 said:
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.
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To be sure, we're talking about German bonds here... Germany's social expenditure as %age of GDP has been going down steadily since the crisis, in contrast to the majority of other countries across the world.
 
Martinghoul said:
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
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Thanks for the link. Why would anyone buy the bond in leiu of keeping cash in a bank account?

Is this bond perceived as safer than the bank? Or is it some market mechanism (like its impractical to actually keep cash under your mattress.)
 
newwurldmn said:
Thanks for the link. Why would anyone buy the bond in leiu of keeping cash in a bank account?

Is this bond perceived as safer than the bank? Or is it some market mechanism (like its impractical to actually keep cash under your mattress.)
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Correct, a bond has value as collateral... You can't practically use cash under your mattress (or in a vault or in a truck or whatever) in the same manner. Moreover, new regulation designed to improve the stability of funding of the banking system also means that, if you're, say, a large corporate, banks don't want your deposit, since it's costly.
 
I think bail-ins are great and healthy... Moreover, they are not "new news", so to speak. Denmark did the original, shocking one in 2011 with Amagerbanken. There have been ongoing discussions about these in 2013 in other places, e.g. New Zealand.

The subsequent random bullsh1t conclusions that ZH arrives at are another matter altogether.
 
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