Germany's Debt Interest -0.28%... Payed To Borrow Money

[Economy 52,861]

https://www.bnnbloomberg.ca/draghi-sees-prospect-of-more-ecb-stimulus-amid-weak-inflation-1.1274618

 

The prospects of further monetary easing by the European Central Bank as well as the US Federal Reserve and weakening global growth raising demand for safe heavens have pushed up bonds

 

German 10 year bonds yields fell to a record low of -0.28%

 

Essentially Germany is being payed to borrow money. For every $1 Billion it borrows, it gets $2.8 Million back for free

 

When adjusted for inflation in real value it's getting back even more. In fact when adjusted for inflation many Countries have real negative interest rates including Japan, Canada, and several European Countries

[Mr Judas 4,106]

I didn't really understand this 

[NotNightwing 1,710]

Sounds like a fantastic opportunity to invest in infrastructure. I don't know much about government bonds. Are the interest rates floating?

[Economy 52,861]

47 minutes ago, Deku said:

Sounds like a fantastic opportunity to invest in infrastructure. I don't know much about government bonds. Are the interest rates floating?

 

1 hour ago, Mr V said:

I didn't really understand this 

Governments generally borrow thru bonds. A bond simply is something you buy and it has a maturity date. When that date is reached the person that sold you the bond has to pay back the Principal plus whatever interest agreed (some bonds spread out the interest payments rather than all at the end)

 

Governments mostly sell 2 year, 5 year and 10 year bonds although other time horizons also exist

 

Everyday they sell bonds to raise money and every day they pay off old bonds that are due...

 

The exact interest rate fluctuates daily based on supply and demand... When the Government needs less money but there's plenty of investors or pension funds willing to buy them, interest rates drop. 

 

Market rates set by the fed and where the fixed market is at also influenced rates

 

When the economy is weakening and investors are afraid to invest in stocks, more money flows into fixed income like bonds and so interest rates drop

 

However rates going negative is extremely rare. Usually it happens if there's fear among ppl that banks aren't safe etc and they'd rather lose a small amount of money but have it safely invested in the government than to just hold it as cash

 

In Germanies case it uses the Euro so ppl from other struggling EU Nations may see German bonds as a safe heaven that will hold on to their money and pay back later