🌳Are debt instruments that offer to pay the investor a maturity amount lower than the purchase price of the bond.
🌳These are generally issued by central banks or governments, and investors pay interest to the borrower to keep their money with them.
Reasons behind buying Negative Yield Bonds:
🌳To create a diverse portfolio: Many hedge funds and investment firms that manage mutual funds invest in negative bonds in order to diversify their investment.
🌳To use them as collateral: Bonds are often used to pledge as collateral for financing and as a result, need to be held regardless of their price or yield.
🌳To take Benefit from Currency Gain: Foreign investors might believe the currency's exchange rate will rise, which would offset the negative bond yield.
🌳To Avoid Domestic Deflation Risk: Domestically, investors might expect a period of deflation, or lower prices in the economy
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