FYI: I previously postulated that negative interest rates are destructive (though profitable) and that they negate human life on a profoundly fundamental level. If they’re so bad, then how and why do they exist? Well, clearly not everyone sees it my way. My proclamations must be hyperbole, right? Not so fast. A look at the holders of negative yielding debt reveals that some potentially perverse motives could be at play.
Plenty of articles explain why investors might buy bonds with negative yields (such as this, this, and this). Never mind the prospect for losing money. Safety, cross-currency bases, and the “greater fool theory” apparently trump the primary purpose of investing. While there’s probably some truth to these commonly given reasons for negative yields, I find them wholly unsatisfactory.
The global bond market is huge. SIFMA estimates its size to approach $103 trillion. While I’ve highlighted the profit potential of negative yielding bonds before, I find it hard to believe that only speculators are behind their absurdity. Luckily DoubleLine Funds helps shed some light on this mystery.
Regards,
Ted
https://integratinginvestor.com/motives-creating-negative-yields/
