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So it is a zero coupon bond sold above par, but this doesn't mean the bank isn't making money off of it. There are a lot of technical reasons that these can be

So it is a zero coupon bond sold above par, but this doesn't mean the bank isn't making money off of it. There are a lot of technical reasons that these can be purchased (such as a tax advantaged stutus or a requirement to hold certain duration on a portfolio). I'm an expert on German bond market, but I expect the actual yield to be positive after taking into account other factors (or there being some regulatory reason). Last time I saw an article on a negative yield mortgage, there were tax resons it was actually coming out positive.

whatok 7y ago
I'm looking at the bond on Bloomberg right now and it's showing a yield of -0.14% with a price of EUR104.54. All things equal, if you buy this bond right now and hold it to maturity, that will be your yield. This is an after-tax yield. I'm not sure what bank you are referring to in the first sentence. These are bonds issued by the country.
- jnordwick 7y ago
  Any after tax yield is going to be an estimate. i no longer have access to a bloomberg login, but does it give its methodology? @ 104.54, YTM would be -0.44 not taking other factors into account. There could also be technical reasons such as collateral requirements or other banking/trading requirements. > I'm not sure what bank you are referring to in the first sentence. These are bonds issued by the country. The purchasing institutions, not the issuing. These mostly banks aren't just giving money away, and they don't really have costs associated with carrying base money since they can just ship cash back to the central bank for reserve credit, i assume under most conditions. And the can always go elsewhere in the eurozone for yield, but they seem to need bunds for particular reason. not sure, i just pretty sure they aren't giving money away for no reason. they could even lay off currency risk and go for US Tsy.

whatok 7y ago

I'm looking at the bond on Bloomberg right now and it's showing a yield of -0.14% with a price of EUR104.54. All things equal, if you buy this bond right now and hold it to maturity, that will be your yield. This is an after-tax yield. I'm not sure what bank you are referring to in the first sentence. These are bonds issued by the country.

jnordwick 7y ago
Any after tax yield is going to be an estimate. i no longer have access to a bloomberg login, but does it give its methodology? @ 104.54, YTM would be -0.44 not taking other factors into account. There could also be technical reasons such as collateral requirements or other banking/trading requirements. > I'm not sure what bank you are referring to in the first sentence. These are bonds issued by the country. The purchasing institutions, not the issuing. These mostly banks aren't just giving money away, and they don't really have costs associated with carrying base money since they can just ship cash back to the central bank for reserve credit, i assume under most conditions. And the can always go elsewhere in the eurozone for yield, but they seem to need bunds for particular reason. not sure, i just pretty sure they aren't giving money away for no reason. they could even lay off currency risk and go for US Tsy.