Negative Yields Are for Fools

Article Highlights:

  • German government 10-year bonds are currently yielding -0.51%.
  • Currently, $13.7 trillion of global bonds are trading with yields below zero.
  • Capital-appreciation buyers follow the “greater fool theory” of investing.

Can you imagine a friend borrowing money from you and then telling you that the longer it takes him to pay you back, the less money he owes you?

He’s likely to quickly lose some friends that way.

But that’s exactly what’s happening in global bond markets.

This is the crazy idea that when you buy a bond, not only do you get no interest, but you lose a little bit of your principal the longer you hold it.

You see, if there’s more demand than supply for that bond, the price will go up. That’s just how the market works.

And if the price of the bond goes up, you have to pay a higher price to get the same coupon rate. When that happens, the coupon stays the same, but the bond’s yield falls.

If the price of the bond goes up high enough, the yield could fall into negative territory. This means that you lose money for allowing the borrower to hold your capital.

For instance, German government bonds with 10 years to maturity are currently yielding -0.51%.

If you lend your money to the German government for 10 years, it takes a small slice of your invested capital on an annual basis.

What’s happening right now in global bond markets has no historical precedent.

What Tools Does the Fed Have Left?

Currently, $13.7 trillion worth of global bonds are trading with yields below zero. That’s up 128% from September 2018’s tally of $6 trillion.


Central bankers don’t seem to see anything wrong, as global bond markets from Germany to Japan slide into negative-yielding territory.

In 2016, former Federal Reserve Chairman Ben Bernanke penned an op-ed titled: “What Tools Does the Fed Have Left?” In it, he wrote:

The idea of negative interest rates strikes many people as odd. Economists are less put off by it. … The anxiety about negative interest rates seen recently in the media and in markets seems to me to be overdone. Logically, when short-term rates have been cut to zero, modestly negative rates seem a natural continuation; there is no clear discontinuity in the economic and financial effects of, say, a 0.1 percent interest rate and a -0.1 percent rate.

And here’s where the former Fed head gets it wrong. In the bond world, there are two types of buyers:

  1. Yield buyers. These are your pension funds, insurance companies and mutual funds. Large institutional buyers looking to match their assets with their liabilities.
  2. Capital-appreciation buyers. These are your risk-parity hedge funds, speculators and macro tourists. Basically, anyone looking to make a quick buck in the latest bond rally.

Yield buyers don’t buy negative-yielding bonds. They can’t. They need positive yields to balance an asset/liability sheet.

They won’t pay the bank to hold their money while they owe payments to pensioners and insurance contracts on the other side of the ledger.

Capital-appreciation buyers will buy negative-yielding bonds if they think someone else will come along and pay a higher price. This is also known as the “greater fool theory” of investing.

The Greatest Fools

When bond markets sell off and yields rise, yield buyers don’t sell their bond portfolios. They’re willing to hold, as they’ve already locked in an attractive yield.

On the other hand, capital-appreciation buyers are like fickle teenagers trying to keep up with the latest trend.

If the bond that was purchased at a negative yield is now selling off, then the investor is losing money on both invested capital and the negative yield it bought. For speculators, this is a double whammy.

As the amount of global debt trading at negative yields increases, more of these capital-appreciation fools pile in. It becomes a self-fulfilling cycle.

The problem is the $13 trillion of such debt in the hands of investors betting on higher prices (and further drops in yields).

They’re not buying for income. They’re buying because they believe they can sell to someone else at a higher price. In other words, they’re looking for a “greater fool.”

And this scheme works as long as growth throughout most of the world continues to remain sluggish.

The only way for this cycle to reverse is if yields rise on positive growth and inflation prospects. At some point, bond yields are low enough that they convince investors to buy that new home or car while credit is cheap.

In that way, negative yields stimulate demand for credit, the lifeblood of the economy.

At some point, lower rates — even negative ones — will lead to global economic growth.

When this happens, the capital-appreciation buyers will all head for the exits at the same time. And they might all suddenly realize the greatest fool was in the mirror all along.


Ian King

Editor, Automatic Fortunes

Previous Post
Next Post


prediksi parlay

Pretty! This was an extremely wonderful article.
Thank you for providing these details.

judi blackjack

Thank you for the good writeup. It if truth be told
used to be a enjoyment account it. Look advanced to far brought agreeable from you!
However, how could we communicate?

situs idn play poker online

What a data of un-ambiguity and preserveness of precious know-how about unexpected emotions.

latest menu prices

That is very interesting, You are an excessively skilled blogger.
I’ve joined your feed and stay up for in search of more of your magnificent post.
Additionally, I have shared your web site in my social networks

More Help new education policy 2019 india

I do trust all the ideas you have offered for your post.
They’re really convincing and will certainly work.
Still, the posts are too short for newbies. Could you please lengthen them a
bit from next time? Thank you for the post.


Nice post. I was checking constantly this blog and I’m impressed!
Extremely useful information particularly the last part 🙂 I care for such information a lot.
I was looking for this particular information for a long time.
Thank you and good luck.

this gamefly

My spouse and I absolutely love your blog and find
nearly all of your post’s to be precisely what I’m looking for.
Would you offer guest writers to write content available for you?

I wouldn’t mind publishing a post or elaborating on some of the subjects you write related to here.
Again, awesome web site!

was asmr

I know this website offers quality dependent content and other material,
is there any other website which gives these stuff in quality?

of asmr

Appreciate this post. Will try it out.

asmr an

I love it when folks get together and share thoughts.
Great blog, keep it up!


Thanks , I’ve just been searching for info about this topic for a long time and yours is the greatest I
have found out till now. However, what about the bottom line?
Are you sure in regards to the supply?

web site

I read this paragraph fully regarding the ifference of most up-to-date and
earlier technologies, it’s remarkable article.

web site

but gamefly

Woah! I’m really loving the template/theme of this
website. It’s simple, yet effective. A lot of times it’s hard to
get that “perfect balance” between superb usability and visual
appearance. I must say you have done a fantastic
job with this. Also, the blog loads very quick for me on Firefox.
Superb Blog!

off asmr

Great info. Lucky me I recently found your blog by chance (stumbleupon).

I have bookmarked it for later!

Informative article, exactly what I needed.

asmr where

My coder is trying to persuade me to move to .net from PHP.
I have always disliked the idea because of the costs. But he’s tryiong
none the less. I’ve been using WordPress on numerous websites for about a year and am worried about switching to
another platform. I have heard fantastic things about
Is there a way I can transfer all my wordpress posts into it?
Any help would be greatly appreciated!

asmr why

Greetings! Very useful advice within this article!
It’s the little changes that make the biggest changes. Many thanks for sharing!

Have you ever thought about publishing an e-book or guest authoring on other blogs?
I have a blog based on the same information you discuss and would really like to have you share some stories/information. I
know my viewers would appreciate your work. If you’re even remotely
interested, feel free to shoot me an e-mail.

Hola! I’ve been reading your website for a long time now
and finally got the bravery to go ahead and give you
a shout out from Kingwood Tx! Just wanted to mention keep up the fantastic work!

Good day! I know this is somewhat off topic but I was wondering if
you knew where I could locate a captcha plugin for my comment form?
I’m using the same blog platform as yours and I’m having trouble finding
one? Thanks a lot! scoliosis


priligy price – over the counter cialis canada cialis online women


natural ed pills – erectile dysfunction causes male ed drugs


prednisone 30 mg – prednisone without prescription 10mg mail order prednisone


order provigil online – modafinil anxiety provigil weight loss


accutane prices in south africa – buy accutane online india buy accutane tablets


buy amoxicillin online – buy amoxicilin noscript canada amoxicillin rash


purchase vardenafil online – vardenafil side effects in men mail order vardenafil online


buy ivermectin uk – ivermectin 3mg tabs ivermectin eye drops


canadian pharmacy online prescription tadalafil – cialis offer best price tadalafil online canada


canadian online pharmacy accutane – canada online pharmacy accutane accutane isotretinoin


buying lyrica in mexico – canadian pharmacy cialis 40 mg canadian vet pharmacy


amoxicillin pneumonia – can you buy amoxicillin over the counter cvs amoxicillin price no insurance


buying viagra without a prescription – buy sildenafil no prescription sildenafil prescription nz


cialis purchase online – tadalafil 40 mg online india tadalafil 20mg no prescription


buy ivermectin 3mg – ivermectin 12 mg buy stromectol uk


prednisone uk online – prednisone tablets canada prednisone 105


[url=]ivermectin 0.1[/url]


modafinil anxiety – getting a provigil prescription buy provigil online


can you buy zithromax over the counter in canada – generic azithromycin 100mg azithromycin 500mg dose


furosemide 40 – furosemide 20 mg tab cost


buy clomiphene online – clomid online 50mg clomid for sale


viagra online europe – where can i get viagra in south africa where to buy cheap sildenafil


cialis generic in india – take cialis cost tadalafil generic


ivermectin malaria – stromectol 0.5 mg stromectol over the counter


pala casino online – casino online slots online slots real money


erection pills online – ed pills no prescription erectile dysfunction cure


prednisone 475 – buy generic prednisone online prednisone 10mg online


generic viagra soft gel capsule – viagra for sale online canada us viagra over the counter


tadalafil 5mg – Best price for generic cialis tadalafil 2.5 mg online india


ivermectin price – generic ivermectin for humans oral ivermectin cost


best over the counter ed pills – mens ed erectile dysfunction medications

zovre lioptor

Wonderful goods from you, man. I have understand your stuff previous to and you are just too great. I actually like what you have acquired here, certainly like what you are saying and the way in which you say it. You make it enjoyable and you still care for to keep it sensible. I can not wait to read far more from you. This is actually a tremendous website.

my url

Thank you for every other fantastic article. Where else could anyone get that kind of information in such an ideal method of writing? I’ve a presentation subsequent week, and I’m at the search for such information.

web site

I like this website very much, Its a real nice billet to read and receive information.

their web hosting

Hello Dear, are you actually visiting this site on a
regular basis, if so after that you will definitely take pleasant

I don’t even know the way I stopped up here, however I assumed
this submit used to be good. I don’t recognize who you
are but definitely you’re going to a famous blogger if you aren’t already.


asmr why

Way cool! Some very valid points! I appreciate you writing this
article and also the rest of the website is very good.

was scoliosis surgery

Hello, for all time i used to check website posts here early in the dawn, for the reason that i love to learn more and more.

the asmr

Thank you, I’ve just been searching for information approximately this
subject for a while and yours is the greatest I’ve discovered so far.

But, what in regards to the conclusion? Are you sure
concerning the source?


[url=]tretinoin cream usp 0.025 buy online[/url]

asmr your

Hi there to every body, it’s my first visit of this website; this web site consists of remarkable and truly excellent material
designed for visitors.

tiktok takipçi satın al

Sevdigim �ocugu stalkliyordum umarim beni g�rmez ??????

asmr that

Hey just wanted to give you a quick heads up.
The words in your content seem to be running
off the screen in Opera. I’m not sure if this is a format
issue or something to do with internet browser compatibility but
I thought I’d post to let you know. The design and style look great though!
Hope you get the issue solved soon. Thanks

scoliosis surgery was

Very descriptive article, I enjoyed that a lot.

Will there be a part 2?

lasix 80 mg

furosemide cost goodrx furosemide vot Glulp

tiktok ucuz takipçi satın al

I went crazy when I saw my stalkers

furosemide generic

lasix 40 mg price lasix price vot Glulp

cheap lasix

furosemide 40 mg tablet price over the counter lasix vot Glulp

aktif takipçi satın al

�alisiyor bilginize??

cost of lasix

buy lasix online no prescription furosemide 10 mg vot Glulp

the quest bars

I always used to study post in news papers but now as I am a user of web therefore from now
I am using net for articles, thanks to web. quest bars quest bars

trend topic satın al

wow they finally did that too bee ??

We absolutely love your blog and find the majority of
your post’s to be what precisely I’m looking for. Would
you offer guest writers to write content for you personally?
I wouldn’t mind writing a post or elaborating on most of the subjects you write in relation to here.

Again, awesome weblog! asmr asmr

furosemide cost cvs

lasix over the counter cvs furosemide 20 mg cost vot Glulp

great submit, very informative. I’m wondering why the opposite experts of this sector don’t notice this.

You should proceed your writing. I’m sure, you’ve a huge readers’ base already!
scoliosis surgery scoliosis

Right here is the right blog for anyone who would like
to understand this topic. You understand a whole lot its almost tough to
argue with you (not that I actually would want to…HaHa).
You definitely put a brand new spin on a topic that has
been discussed for ages. Excellent stuff, just excellent! ps4 games ps4

What’s up every one, here every one is sharing these kinds of experience, therefore it’s nice to read this blog,
and I used to pay a quick visit this webpage daily.
cheap flights cheap flights

Wow, amazing blog layout! How long have you been blogging for?
you make blogging look easy. The overall look of your website is fantastic, let alone the
content! quest bars quest bars

No matter if some one searches for his required thing, so he/she needs to
be available that in detail, so that thing is maintained
over here. scoliosis surgery scoliosis surgery

trend topic satın al

Stalkerlarimi �gredim

stromectol how much it cost

ivermectin 3 ivermectin buy nz


[url=]retin a otc uk[/url]

ivermectin 6 mg tablets

stromectol medicine ivermectin 6

stromectol uk

ivermectin cost ivermectin 10 ml

stromectol 0.5 mg

stromectol online ivermectin cream 1%

buy ivermectin ivermectin where to buy

ivermectin sale ivermectin syrup

ivermectin 1mg stromectol generic

stromectol 12mg stromectol tablets buy

ivermectin pills for humans where to buy ivermectin uk

where to buy ivermectin stromectol price in india

ivermectin buy

ivermectin lotion for lice ivermectin over the counter canada

twitter trend topic satın al

umarim kesintisiz hergün çalisir

slot online terbaik resmi

Hey very nice blog!! Man .. Excellent .. Amazing .. I will bookmark your site and take the feeds also…I’m happy to find a lot of useful information here in the post, we need develop more strategies in this regard, thanks for sharing. . . . . .

It’s an remarkable article for all the online visitors; they will
obtain benefit from it I am sure. part time jobs
hired in 30 minutes

ps4 games but

Thanks for sharing your thoughts on on. Regards

there ps4 games

With havin so much written content do you ever run into any problems of plagorism or copyright violation? My blog has a lot of
exclusive content I’ve either created myself or outsourced but it
looks like a lot of it is popping it up all over the web without my agreement.
Do you know any techniques to help prevent content from being stolen? I’d
definitely appreciate it.


prednisone cost – prednisone drugs over the counter prednisone cream


ivermectin without a doctor prescription ivermectin brand name cost of ivermectin medicine


ivermectin horse wormer stromectol 3 mg tablet ivermectin 8 mg


buy generic accutane online cheap – buy generic accutane 40 mg accutane price nz


buy amoxicillin 500mg uk – order amoxicillin 1000mg amoxil


ivermectin for humans walmart – buy ivermectin canada price of stromectol


ivermectin human – price of stromectol ivermectin brand

Kenneth Makins

I have been browsing online more than three hours as of late, but I never discovered any fascinating article like yours. It is pretty worth enough for me. In my view, if all site owners and bloggers made just right content material as you probably did, the net will likely be a lot more useful than ever before.|


canadian pharmacy adderall – mexican pharmacy online ed drug

modafinil sleep

furosemide rob holland what kind of diuretic is furosemide how fast does iv lasix work


ed pills comparison – erectile dysfunction medicines medication for ed

chloroquine otc

albuterol before exercise ventolin 2.5 can albuterol cause chest pain how long for albuterol to work


generic medrol online – methylprednisolone 4mg otc methylprednisolone buy


how to write an essay about my life – pay for research papers help me write a thesis

buy furosemide

lasix tinnitus where can i buy lasix online lasix for horses for sale how much lasix can you take a day


canadian pharmacy viagra reviews – cleocin drug canadian neighbor pharmacy


reputable canadian pharmacy – order lisinopril 5mg for sale cheap canadian pharmacy online

generic amoxil 250mg

zithromax pediatric dose zithromax singapore where to buy zithromax uk where can i buy azithromycin


empire city casino online – casino arizona casino moons online casino

where to buy lasix

neurontin headaches neurontin 300mg how much neurontin is safe to take how long should you take gabapentin


zithromax 250 mg – order azithromycin 250mg online azithromycin 500mg dose


buy ivermectin stromectol – stromectol price usa purchase ivermectin


prescription female viagra – viagra 200 mg online real viagra


60 mg cialis – cheap cialis online discount generic cialis canada

ventolin tab 4mg

levitra price increase [url=]levitra online prescription [/url] levitra savings buy generic levitra

online viagra

how does levitra compared to viagra prescription levitra price comparison levitra cialis viagra buy levitra online


ivermectin 3mg over counter – stromectol stromectol buy express pharmacy


cheap erectile dysfunction pill – order accutane online pharmacy accutane online prescription


cost of ivermectin ivermectin lotion 0.5 .05 ivermectin dosage for dogs who loaloa ivermectin

levitra 20 mg price

kamagra-cialis cialis vendita online esiste un farmaco generico del cialis come acquistare cialis in contrassegno

sugarhouse casino online nj

online casino canada


amoxicillin without a doctors prescription – purchase amoxil 250mg free slots

turning stone online casino login

rsweeps riversweeps online casino


order pregabalin 150mg for sale – furosemide 20 mg otc furosemide 40 mg buy online uk

same day payout online casino

mount airy online casino

ventolin 50 mcg

goat ivermectin ivermectin canada what is ivermectin used to treat ivermectin how does it work


cialis paypal payment [url=]cialis naturel [/url] cialis existe t il en generique oГ№ est fabriquГ© cialis generique

online casino usa no deposit bonus

online casino sign up bonus no deposit

el royale online casino reviews

vegas casino online customer service

vegas casino online no deposit bonus codes 2021

online casino real money no deposit


generic clomid 25mg – cheap ventolin 4mg cytotec canada

essays to write about

writing essay online

ivermectin 3mg dose

permixon et viagra acheter viagra pfizer belgique substitut du viagra sans ordonnance viagra dangereux ou pas


dapoxetine 90mg pill – doxycycline for sale online prednisolone order

plaquenil discount

cialis vente cialis 20mg pas cher le prix du cialis en pharmacie cialis ou sildenafil

essays to write about

professional essay writing service

gay dating facial aesthetics

first time dating as a gay man

canada dating gay

number 1 gay dating site denver

squirt gay dating review

free gay dating site in india


levothyroxine usa – purchase levothyroxine without prescription buy gabapentin 800mg online cheap

generic cialis online

rheumatoid arthritis plaquenil quineprox 0.4 plaquenil skin side effects pictures what flouresces on faf with plaquenil toxicity


buy synthroid 100mcg without prescription – buy viagra sale cialis 20mg us

viagra origine

metformin ndma metformin for sale uk metformin uses and side effects what happens if a non diabetic takes metformin

the point of critical thinking is to learn to

critical thinking questions examples

ati critical thinking exam

critical thinking and problem solving examples

write an argumentative essay

essay about school uniform

how to write a conclusion in an essay

descriptive essay

college essay format

chicago essay format

how to write a rhetorical analysis essay ap lang

writing an argumentative essay

essay title page

introduce yourself essay


modafinil sale – buy provigil without prescription ivermectin 12mg pills

viagra generica

kamagra gel online viagra for sale cheapest online pharmacy for cialis how long does viagra work

cialis 40mg

cialis costi cialis 5mg differenza tra viagra e cialis cialis 5 mg a cosa serve


viagra vs cialis vs vardenafil – vardenafil bayer orlistat oral


buy hydroxychloroquine online – plaquenil 200mg for sale buy valacyclovir 1000mg without prescription

buying viagra online

ild and plaquenil [url=]chloroquine 250 mg tablets [/url] weight gain while taking plaquenil what are the side effects of plaquenil

viagra originale

generic cialis [url=]cialis usa rezeptfrei [/url] how to use cialis recreational how effective is levitra


sildalis medication – buy fluconazole sale order metformin sale


ampicillin 500mg oral – purchase ampicillin generic buy plaquenil 200mg generic

it asmr

Hi there! Quick question that’s entirely off topic. Do you know how to make
your site mobile friendly? My website looks weird when browsing from my
iphone 4. I’m trying to find a theme or plugin that might be able to fix this problem.
If you have any suggestions, please share. With thanks!

viagra best buy

viagra 200 mg viagra se vende sin receta cual es la dosis recomendada de viagra como dejar de recibir correos de viagra cialis


plaquenil for sale online – hydroxychloroquine pills plaquenil cost

como se usa cialis

kamagra viagra gel when does cialis patent expire in australia kamagra 100mg oral jelly review where to buy kamagra

amazon viagra

when cialis generic lowest price viagra high blood pressure and viagra when to take cialis 20mg for best results

twitter retweet hilesi

beni neden stalkliyorsunuz anlamis degilim ama ögrendigim iyi oldu ??

viagra in spain

viagra remboursement mutuelle acheter viagra pas cher acheter viagra generique en france combien de temps avant pour prendre du viagra

tadalafil 10mg price

cialis in farmacia cialis 5mg prezzo acquisto cialis originale 5 mg dove comprare cialis a napoli

generico del cialis

cialis demi vie achat cialis livraison 24h what are cialis tablets used for forum ou acheter du cialis

cheap cialis

cialis prescrizione medica cialis online italia contrassegno cialis 5 mg generico online dopo quanto agisce cialis

Jesse Bridge

I’m really enjoying the design and layout of your blog. It’s a very easy on the eyes which makes it much more enjoyable for me to come here and visit more often. Did you hire out a developer to create your theme? Great work!|

viagra timing

buying viagra online cialis 20mg side effects alternatives to viagra in australia how long before viagra works

ivermectin 4

cialis e simili cialis generico senza ricetta cialis generico come si chiama dove acquistare cialis sicuro

Detra Labarr

Hello! Quick question that’s completely off topic. Do you know how to make your site mobile friendly? My weblog looks weird when viewing from my iphone. I’m trying to find a theme or plugin that might be able to fix this issue. If you have any suggestions, please share. Appreciate it!|

cialis usa online

apotheke cialis cialis gГ©nГ©rique pas cher comparaison viagra cialis et levitra que choisir viagra ou cialis

generic tadalafil from uk
cialis generic

prix du viagra combien coute le viagra effet du viagra sur la femme comment marche le viagra

side effects of tadalafil

tadalafil online generic tadalafil from uk

cost of plaquenil uk

canada online viagra viagra connect in usa can i buy real cialis online how is viagra taken

generic tadalafil from uk

cheap generic cialis for sale tadalafil cost walmart

comprare viagra

viagra fГјr frauen viagra precio farmacia cialis o viagra que es mejor como tomar viagra generica

ivermectin 8000 mcg

viagra milanuncios comprar viagra en murcia cuanto tarda en hacer efecto el viagra que es viagra

viagra after age 70

sklice ivermectin ivermectin lice gave goat too much ivermectin ivermectin is effective against which organisms? vtne

Gerardo Misch

Hi! I’m at work browsing your blog from my new iphone! Just wanted to say I love reading your blog and look forward to all your posts! Carry on the superb work!|

cialis pills

tadalafil brands where to buy generic cialis online safely

sildenafil price

plaquenil vs methotrexate where to buy plaquenil plaquenil eye exam icd 10 what antidepressant can you take with plaquenil


cialis without prescription buy tadalafil

tadalafil cialis

where to order tadalafil tablets buy cialis

generic viagra usa

plaquenil acne buy plaquenil online joint pain after stopping plaquenil what is plaquenil opiate

Chuck Meshew

Highly descriptive article, I loved that bit. Will there be a part 2?|

Henry Sisney

Piece of writing writing is also a excitement, if you be familiar with afterward you can write if not it is complex to write.|

ivermectin online

molecule viagra meilleur site achat viagra achat de viagra en suisse ou acheter generique viagra

Leave a Reply

Your email address will not be published.