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Thursday, April 09, 2015

Economalypse

Swiss Government Becomes First Ever To Issue 10Y Debt At A Negative Yield

It had to happen sooner or later... in the new normal of yield-reaching, collateral-shortage-ing, money-printing economalypse, the Swiss government has become the first ever to issue a 10Y sovereign bond at a negative yield. As WSJ notes, while several European countries have sold government debt at negative yields up to five years of maturity - which means investors effectively pay for the privilege of buying it - no other country has previously stretched this out as long as 10 years. Mission Accomplished Central Bankers?

Now, why on Earth would anyone buy a bond with a negative yield? No, really, can someone explain to me why this would be considered a sound investment. Now in Switzerland, to do banking business you have to possess a certain percentage of national bonds, so that is one reason, but why would anyone invest ANY money into this? The other thing is possibly the belief in Swiss Franc deflation. Even though it may be worth fewer Francs when you cash out, it may be worth more against other currencies around the world. Even then, I don't know why you wouldn't just stuff it in a mattress and let it be worth the original 100 Francs.

Now put this with the fact that Greece is trying to delay debt payment and that Saudi Arabia is running a deficit this year and you have some serious money shenanigans going on.

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