Germany for First Time Sells 30-Year Bonds Offering Negative Yields • Hacker News Board

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#141

Post by unreal37 » Wed, Aug 21, 2019, 6:57 PM UTC

nostrademons wrote: post #126

tryitnow wrote: post #58

Earlier quoted context omitted.

This is an example of how to write a good article, I think the first sentence answers your question: "Germany sold 30-year debt at a negative yield for the first time, as investors desperate for safe assets bet that further falls in yields will boost the value of the bonds in the future." The investors buying these bonds are simply betting that these bonds will increase in value (which will supposedly happen if centr…

The implication then is that we're in a bond bubble. When you're buying something that you know has negative fundamental returns on the assumption that someone will buy it from you at a higher price, that's the definition of a bubble. And like many bubbles, it's entirely possible they'll be right in the short term, but it's basically guaranteed that they'll be wrong in the long term. You know exactly what a bond will…

Expecting the price of something to rise in the future is not the definition of a bubble.

When people were selling houses in Detroit at the bottom of the housing crisis for $1000, the people buying them were expecting the value to rise in the future.

It's almost like profiting off of fear not greed.

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#142

Post by arbitrage » Wed, Aug 21, 2019, 6:57 PM UTC

jchrisa wrote: post #130

Slightly OT but I’ve been trying to google this for a while and there are people reading this who will know where I can look: If a government (pretend US if it helps) stopped collecting taxes, and instead funded the budget by printing money every year, who would be the winners and losers compared to the current system? Where can I go to learn more?

everyone would be losers, because that is insane. see recent history in zimbabwe. the keyword you're looking for is hyperinflation.

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#143

Post by ThrustVectoring » Wed, Aug 21, 2019, 6:57 PM UTC

thorwasdfasdf wrote: post #80

I understand that policy makers think that low interest rates will encourage people to put their money into investments like the equities or a business by forcing people out of saving. But, have they ever considered that they may actually be achieving the opposite? Someone who just turned 65 (like aging Europe), really really needs to save in safe assets. Negative yielding bonds don't change that need! So, instead of…

The extra saving means higher prices for the assets of current retirees, which should end up resulting in them selling assets and spending the extra money.

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#144

Post by rags2riches » Wed, Aug 21, 2019, 7:00 PM UTC

SilasX wrote: post #125

secabeen wrote: post #122

Earlier quoted context omitted.

Because a bank can go under, and you can lose your money in excess of the insured amount.

Not if it's a bank that specifically caters to this crowd and doesn't take any of the normal risks associated with lending.

This imaginary bank would still have costs. What would be their income?

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#145

Post by wil421 » Wed, Aug 21, 2019, 7:00 PM UTC

twoheadedboy wrote: post #62

rifung wrote: post #21

Earlier quoted context omitted.

> Those of you (US) with large stock/cash positions: what are you doing to weather the (inevitable) storm I follow the traditional advice of doing nothing and not trying to time the market.

Yeah I get that. What about for people like me who are trying to enter the market? I'm wondering if it's worth it to wait and see, or if I should just not worry too much and invest now anyway.

Minimum 3 months of savings, pay off high interest debt, and max out 401k or at very least max out your employer match. Max out employee stock purchase programs and sell quickly.

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#146

Post by throwaway123156 » Wed, Aug 21, 2019, 7:04 PM UTC

jchrisa wrote: post #130

Slightly OT but I’ve been trying to google this for a while and there are people reading this who will know where I can look: If a government (pretend US if it helps) stopped collecting taxes, and instead funded the budget by printing money every year, who would be the winners and losers compared to the current system? Where can I go to learn more?

I suppose it would lead to inflation and as long as the inflation is controlled, that's doable.

Effectively, the government is being funded by all dollar holders at that point. It's a wealth tax of sorts imposed on those who hold their wealth in dollars.

The idea would be that the government is being funded by the fact that $100 today, is worth only about $90 last year, and that loss in value is what's funding the government.

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#147

Post by imtringued » Wed, Aug 21, 2019, 7:09 PM UTC

thorwasdfasdf wrote: post #80

I understand that policy makers think that low interest rates will encourage people to put their money into investments like the equities or a business by forcing people out of saving. But, have they ever considered that they may actually be achieving the opposite? Someone who just turned 65 (like aging Europe), really really needs to save in safe assets. Negative yielding bonds don't change that need! So, instead of…

There is also the risk that injecting additional cash into companies that don't need it further disconnects them from the actual economy. Investors can now make money simply through the appreciation of stocks, housing and dividend payments funded by negative interest mortgages. Since companies no longer need to sell more products, services or participate in the economy the end result is that you are not only not stopping deflation, you are actually mildly increasing it.

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#148

Post by whatok » Wed, Aug 21, 2019, 7:10 PM UTC

jnordwick wrote: post #120

So it is a zero coupon bond sold above par, but this doesn't mean the bank isn't making money off of it. There are a lot of technical reasons that these can be purchased (such as a tax advantaged stutus or a requirement to hold certain duration on a portfolio). I'm an expert on German bond market, but I expect the actual yield to be positive after taking into account other factors (or there being some regulatory reas…

I'm looking at the bond on Bloomberg right now and it's showing a yield of -0.14% with a price of EUR104.54. All things equal, if you buy this bond right now and hold it to maturity, that will be your yield. This is an after-tax yield.

I'm not sure what bank you are referring to in the first sentence. These are bonds issued by the country.

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#149

Post by kgwgk » Wed, Aug 21, 2019, 7:11 PM UTC

devoply wrote: post #5

TheSoftwareGuy wrote: post #2

I feel like I still don't understand negative yields, despite really trying to. Negative yields means that I put in $X (or euro/whatever germany is using) and I later am guarenteed no more than $Y out of the exchange, where Y < X. I am literally guaranteed to lose money. I could just hold on to my money, "keep it under my mattress" and still make a better ROI than bonds with negative yields. Why would anybody buy the…

Because the interest rate will soon be less than the bonds. Negative interest rates coming down the pipe globally. Only way that I can see it getting justified.

> Because the interest rate will soon be less than the bonds

What interest rate are you talking about? The interest rate for all the other maturities was already negative.

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#150

Post by boxy310 » Wed, Aug 21, 2019, 7:15 PM UTC

Mvhsz wrote: post #112

dageshi wrote: post #96

Earlier quoted context omitted.

It would be counter productive to society. Put money in a bank, the bank lends it out, the money serves society buy financing a new business or perhaps consumption but either way it is doing something. Lend it to the government in the form of bonds and they'll spend it on something. If it just goes into the cash account you're describing, it does nothing but exist, in the event of recessions this would be severely da…

That makes sense but I have a follow up question. What forces this? For example, what's to stop a single entity from reaping the rewards of using cash while everyone else buys bonds to keep the economy moving. Is it a government regulation? an agreement between large institutions? or are the gains to each individual entity large enough that the negative yield is worth it?

Cash or a bank demand account is not without their own inherent risks. A fire, robbery, or forced currency exchange could destroy the value of the physical commodity of cash, and the FDIC only insures individual account bank deposits up to a certain limit so a bank institution failure could cause losses to individual accounts.