Free money for Deutsche Bahn. I’m sure this perversion of finance ends supremely. Since Germany is the Mother Theresa of credit and everyone loves her, I don’t see how other European corporations could compete with their companies, who sport a capital structure which entails free money, unlimited. We hem and haw over Chinese companies dumping shit on our shores and how they great dog eating currency manipulators. But how is this better? This is far worse than subsidies. This is the fucking Elephant Man on the front page of GQ magazine.
($388 million) bond sale to funds, while banks bought 23 percent, according to a person familiar with the matter who asked not to be identified because they aren’t authorized to discuss the offering. Investors in Germany and Austria bought most of the bonds.
Investors in the state-owned German rail operator will effectively pay to lend to the company after its bonds were sold to yield minus 0.006 percent on Tuesday. Yields on more than $10 trillion of sovereign and investment-grade corporate bonds have been driven to zero or below as central bank efforts to boost their economies inflate asset prices.
“It must feel awkward to be exposed to a credit risk and simultaneously lock in a guaranteed loss,” said Hyung-Ja de Zeeuw, an Amsterdam-based senior credit strategist at ABN Amro Bank NV. “It’s the world upside down: you issue bonds and you get money for free. It’s a result of unconventional policy.”
According to BofA, the average euro land investment grade yield is 0.8%.
This is fuckery of the very first magnitude.
If you enjoy the content at iBankCoin, please follow us on Twitter
Wish I knew what a negative yield bond was.
Issuer gets paid to borrow money
Who the fuck participates in this shit? Those funds should be shuttered immediately.
I guess if somebody thought inflation would be -2% annually over the same period…
Theoretically (and seemingly realistically) speaking, if I moved to Switzerland where the 20 Yr is -0.24% and 30 Yr is -0.10% and tried to take out a 15 Yr mortgage, would the bank be paying me interest?
People invest in corp bond funds.
All these shit bonds get put in benchmark bond index.
Fund managers basically copy the benchmark index.
=> plenty buyers for bonds at whatever yield they issue at. Madness ensues.
It also isn’t a guaranteed loss. If yields dip lower a capital gain can be made.