What does a negative-yielding bond mean

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China sold its first negative-yielding sovereign bond on 18 November 2020. Yield on the five-year, €750m bond was priced 0.3 percentage points above the benchmark mid swap rate of minus 0.45 per cent, offering investors an effective interest rate of minus 0.15 per cent. The rest of the €4bn euro-denominated debt offering was composed of a 10-year €2bn bond and a 15-year €1.25bn bond, carrying yields of 0.318 percent and 0.665 per cent, respectively.

What does a negative-yielding bond mean? Why would investors buy a negative-yielding bond? What would you choose if you were an investor in the market? Briefly explain.

Reference no: EM132711510

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