UK Government sells negative yield bonds

[anonymous-user]

Wowzers! Investors pay to lend money to the UK government!

http://archive.li/pATfn

The UK has sold bonds with a negative yield for the first time as a drop in inflation has highlighted how the Bank of England may need to take further steps to revive price growth back to its 2 per cent target.

The country sold £3.8bn of three-year gilts at a yield of minus 0.003 per cent, according to the Debt Management Office. The slightly negative yield suggests investors who hold the debt to maturity will get back less than they paid, when accounting for regular interest payments and the return of principal.
The UK had sold a one-month bill at a negative yield in 2016, but this represents the first time it has sold a conventional longer term bond at yield below zero.

[Camelot1971]

How would you get interest payments on a negative rate? Surely you would have to pay the government at regular intervals? Or am I being thick? (most probably!)

[Troubleatmill]

I'll bite - not that I am into bonds.


You lend the Govt £100,000 on the basis you think you will get X% interest.

Turns out that bond is now worth £95,000 due to whatever conditions.
Govt sells it on open market to A.N.Other

You just lost a bit of equity.

The more enlightened will soon come along and provide clarity.

[Jonesy23]

With negative rates you're basically paying a fee to keep your cash in a secure store compared to some of the other more volatile alternatives you might have.

The fun begins if you apply negative rates to things like bank accounts, though any time the rate is less than inflation that's effectively what you have anyway, but you hope no-one notices.