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Who is buying negative-yielding bonds?
My name’s Mike Garry, and my company is Yardley Wealth Management. We’re a fiduciary, fee-only financial planning and wealth management firm in Newtown, Pennsylvania. That’s in Bucks County.
You may have heard by now that there are bonds selling in the world with negative interest rates. And when I say bonds, I mean more than $15 trillion of mostly European government and some corporate bonds. Now, what does that mean? It doesn’t mean that you get a bill for the bond when you cash it in, it means that almost all of them were in the secondary market, meaning that people paid a premium for the bond to be able to get the yield, I mean, to get the coupon that they got, and then when the bond matures, they’ll get it back at par.
Now, people think all the time, “Well, who would buy a negative- yielding bond?” We get them all the time. We get people transferring bonds that they bought themselves, and they think they’re getting a coupon yield, but they’re not looking at the overall yield to maturity. You know, a bond will pay them $1,000 when it matures, but they paid $1,200, and they did it because they get, like, a 5% coupon. But the reality is, it’s not a great investment, and they’re hard to sell.
Anyway, if you have any questions about negative-yielding bonds, please give us a call, (267) 573-1019, or reach out to us on social media. Thanks.
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