China borrows at negative interest rates for the first time

[Zsari]

China borrows at negative interest rates for the first time | CNN Business

China is cashing in on fears that the West's faltering economic recovery will keep interest rates near record lows for a long time.

www.cnn.com

Does that mean the buyer has to pay China interests for the bonds? Sounds like one deal you can't lose.

 

[zectech]

China borrows at negative interest rates for the first time | CNN Business

China is cashing in on fears that the West's faltering economic recovery will keep interest rates near record lows for a long time.

www.cnn.com

Does that mean the buyer has to pay China interests for the bonds? Sounds like one deal you can't lose.

That means the bond price has been bid up. IIRC, interest rates rise when there is less demand in buying bonds (thus trying to get buyers to get interested in buying the bonds). When there is high demand for bonds, the price to buy the bonds goes up, yet interest rates fall. When there is very high demand for bonds, the price could keep going up to the point where there is negative rates. People buy the bonds not necessarily to make money off the bond interest, they hold them as like a stock investment, the price of the bond could keep going up, so the bond holder can make some money depending on what price the buyer bought the bond. I have no clue where I learned this, probably watching CNBC world or something like that.

This system rewards solvent countries like Germany and punishes spend-thrifts like Greece.

Inverse Relation Between Interest Rates and Bond Prices

The inverse relation between interest rates and bond prices may seem illogical at first but it makes sense upon closer examination.

www.investopedia.com

If you have a falling/weakening currency, you don't lose money investing in German Bonds with a strong euro. Same is true with a strengthening Yuan. There are many reasons to invest in negative rates.

 

[Zsari]

That means the bond price has been bid up. IIRC, interest rates rise when there is less demand in buying bonds (thus trying to get buyers to get interested in buying the bonds). When there is high demand for bonds, the price to buy the bonds goes up, yet interest rates fall. When there is very high demand for bonds, the price could keep going up to the point where there is negative rates. People buy the bonds not necessarily to make money off the bond interest, they hold them as like a stock investment, the price of the bond could keep going up, so the bond holder can make some money depending on what price the buyer bought the bond. I have no clue where I learned this, probably watching CNBC world or something like that.

This system rewards solvent countries like Germany and punishes spend-thrifts like Greece.

Inverse Relation Between Interest Rates and Bond Prices

The inverse relation between interest rates and bond prices may seem illogical at first but it makes sense upon closer examination.

www.investopedia.com

If you have a falling/weakening currency, you don't lose money investing in German Bonds with a strong euro. Same is true with a strengthening Yuan. There are many reasons to invest in negative rates.

Thanks for the explanation. That could be understood as a vote of confidence.

 

[S10]

Chinese bonds are selling like hot cakes recently as global investors rush towards safety. The lower the interest rate, the safer the investment is perceived to be.

The mistake the West is making is trying to keep their economy going while keeping COVID-19 under control. They want to have the cake and eat it too. That's not how it works.

 

[khansaheeb]

China borrows at negative interest rates for the first time | CNN Business

China is cashing in on fears that the West's faltering economic recovery will keep interest rates near record lows for a long time.

www.cnn.com

Does that mean the buyer has to pay China interests for the bonds? Sounds like one deal you can't lose.

Yeh, you are paid to borrow money, sounds like a great deal.

 

[powastick]

That means the bond price has been bid up. IIRC, interest rates rise when there is less demand in buying bonds (thus trying to get buyers to get interested in buying the bonds). When there is high demand for bonds, the price to buy the bonds goes up, yet interest rates fall. When there is very high demand for bonds, the price could keep going up to the point where there is negative rates. People buy the bonds not necessarily to make money off the bond interest, they hold them as like a stock investment, the price of the bond could keep going up, so the bond holder can make some money depending on what price the buyer bought the bond. I have no clue where I learned this, probably watching CNBC world or something like that.

This system rewards solvent countries like Germany and punishes spend-thrifts like Greece.

Inverse Relation Between Interest Rates and Bond Prices

The inverse relation between interest rates and bond prices may seem illogical at first but it makes sense upon closer examination.

www.investopedia.com

If you have a falling/weakening currency, you don't lose money investing in German Bonds with a strong euro. Same is true with a strengthening Yuan. There are many reasons to invest in negative rates.

Certainly it can't be all good. What is the catch?