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Would you pay someone else to take your money? If you answered no, good for you. If you answered yes, many investors in European government and even corporate debt feel the same. The Wall Street Journal’s Daniel Kruger reports that investors have been paying European governments and even corporations like LVMH to hold their money by purchasing bonds at negative yields. Kruger writes:
A growing number of investors are paying governments in Europe for the privilege of holding their bonds.
The amount of negative-yielding government bonds outstanding through 2049 has risen 20% this year to about $10 trillion, the highest level since 2016, according to data from Deutsche Bank Securities.
The expanding pool of such bonds—which guarantee that a buyer will receive less in repayment and periodic interest than the buyer paid—highlights how expectations for growth in much of the developed world have deteriorated.
Government debt sold by countries including Germany, Ireland and Sweden are among those with negative yields. Late Monday, German debt maturing in 2024 yielded minus 0.42%, while Irish and Swedish bonds of the same maturity traded at minus 0.15% and minus 0.32%, respectively.
Corporate bonds issued by LVMH Moët Hennessy Louis Vuitton SE maturing in 2021 also traded at negative yields, according to data from FactSet.
Europe’s growth problems are evident in two of its largest economies. In Germany, where growth has stalled, officials plan on running a budget surplus rather than stimulating growth by running a budget deficit.
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