There are four main reasons that an investor might choose to buy a negative yielding bond. Kathy Jones, a strategist at Charles Schwab, explains it.
Key quotes
“Safety. U.S. Treasury securities are considered risk-free, and when markets are in turmoil, investors may prefer to lose a small amount in exchange for knowing that the rest of their principal is safe.”
“Deflation fears. If an investor believes that prices will fall, then the purchasing power of the money saved could rise.”
“Speculation. Some investors may believe that yields will continue to fall and therefore believe that the price of their negative-yielding bonds will rise.”
“Regulatory requirements. Institutional investors like banks may be forced into holding Treasury securities by regulation.”
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