Why would someone do this with their own money?

Discussion in 'Economics' started by abducens, Oct 25, 2010.

  1. I would think its the Fed keeping the markets orderly. Or is there some special safety in buying negative yield?


    Inflation Bonds Are Sold With Negative Yield for First Time
    Published: October 25, 2010

    At a time when savers complain that they are earning almost no interest from their bank accounts, some investors on Monday bought United States government bonds that effectively had negative rate of return.

    Bizarre as it sounds, that is correct. In an auction of a special kind of five-year Treasury bond, investors paid $105.50 for every $100 of bonds the government sold — agreeing to pay the government for the privilege of lending it money.
  2. sjfan


    That's negative real yield. TIPS principal accrue at the level of headline CPI. So, if inflation picks up, the nominal yield can be very positive.
  3. I regret selling my 2% I-bonds.

    The only consolation is my stack of 3% I-bonds.
  4. LOL....
  5. It has almost all to do with the G20 meeting. Central banks of the G20 are adjusting to their agreements.
  6. sjfan


    Is there something I can explain to you about TIPs, jack? Or do you not believe in 'real' yields?

  7. Netative yields means both inflation & economic stagnation.
  8. sjfan


    Negative real yield means current economic slump and future inflation. How could it possibly signal future stagflation? does a high fed funds rate imply future expansion?

  9. Precisely... The fact that the real yield is negative is neither here nor there.
  10. There are pools of capital.

    Markets provide access to the pools.

    The market offers through a mechanism.

    Capital must be used as "the price of admissiion" to participate.

    Fast forward to selecting the "use of capital" to participate.

    The shorthand representation for poor choices and poor understandings is.... "LOL"

    No one need bet on the future.

    Taking the market's offer is done continually in the Present and the Present only.
    #10     Oct 26, 2010