These are inflation-indexed bonds, so their yield today is negative, but if inflation rates go up the yield will become positive. The way I understand it, they actually are paying now, essentially buying insurance against future inflation. --Joshua On Mon, Oct 25, 2010 at 3:43 PM, Dan Asimov <dasimov@earthlink.net> wrote:
Apparently some treasury bonds have just sold, at government auction, with negative yields:
"Inflation Bonds Are Sold With Negative Yield for First Time" at < http://www.nytimes.com/2010/10/26/business/26markets.html >.
But what does "negative yield" mean?
I feel confident that it does *not* mean that the purchaser of the bond must make periodic coupon payments to the seller.
But perhaps it means that the redemption value of the bond at maturation is *less* than the price it is purchased for? (If so, it's hard for me to imagine why it's not better to just keep that money in a safe all those years. Maybe a good safe is too expensive?)
--Dan
Those who sleep faster are sooner rested.
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