3 ms·

I have hard time to understand negative yield. What does that even mean? I'm paying someone to take my money? Why would it make sense to anyone?

• wetpaws 7y ago
  Because keeping them for you and providing a guaranteed 0% (no gain but no risk) return is already valuable, therefore they are charging some extra fee over it.
• hiram112 7y ago
  Yes essentially you are paying part of your principal each year if the rate is actually negative - you're paying them. The reason is because the central banks have set rates that private banks themselves can loan out money (i.e. create money out of thin air), that you have to compete with their low rates to loan out yours. For example, say you wanted to loan out your money for someone to buy a house. You're competing with banks who can do so at 3%, so you can't go higher, and there is a risk the guy won't pay you back. Since the government is usually the least risky entity to whom one can loan money (since they can print it), the rate you can charge them is even lower than every other type of loan, and since everyone else is loaning at lower and lower rates for riskier ventures, the government ends up paying 0%.
• conanbatt 7y ago
  Its strange from an economic analysis standpoint but its actually pretty pedestrian. Its a cash-position. If you kept cash in a bank account you are insured up to a certain amount if the bank goes insolvent. So people that have 10 billion dollars and wish to remain in a cash position, want to park the money in a place where it is guaranteed: and Treasury bonds are 100% guaranteed (as opposed to bank deposits). So what we are actually seeing is the rise of cash positions in the best stock market position ever.