Take the german 10J-Bundesanleihe for example, as far as I know the rates for it went negative recently.

Is there any incentive for private investors / or institutional ones to invest now into this product? Because just keeping your money with yourself, has for my limited knowledge, a better "ROI" then buying it now? Or is it because you are free to trade it, a speculation on the future that the "ROI" indeed will rise (and so the value with it)?

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    Bond interest rates can never go negative. What you saw is redeem value turn negative. An investor that knows how to take advantage of tax deduction incentive will buy this money-losing bond. They are always a rich individual or coporate need such "tools" to lower their tax ceiling. – mootmoot Jun 28 '19 at 12:33
  • @mootmoot: It's true that you never need to pay an annual fee to hold these bonds, instead you pay more up front than you'll get at redemption. But that's got nothing to do with tax deductions. – MSalters Jun 28 '19 at 14:32
  • @MSalters A bond purchasing cost still a cost. I don't get what you mean "higher up front" when such trade immediately removed a portion of the money invested. – mootmoot Jun 28 '19 at 14:37
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    @mootmoot: "Money immediately removed?" Of course not. If you sell the bond immediately again, you'll see that there is no money "immediately removed". The fact is that the market price of these bonds starts out above the final redemption value, and slowly drifts downwards toward expiry date when it is redeemed. – MSalters Jun 28 '19 at 14:42
  • If you thought interest rates were going to go even lower then bonds bought even at negative rates now could see an increase in capital value in future. Depends how low you think rates can go. – timday Jun 28 '19 at 17:20

Exactly how would you keep the money for yourself? In actual, physical cash? That has a non-trivial risk of being stolen.

For many private investors, the better option is to keep the money in a bank account. That just costs a small amount in fees. But with the current interest rates, don't expect to receive much if any interest. And this is likely not an option if you want to deposit several million euros.

Institutional investors may even be obliged to keep a fraction of their investments in the lowest risk category, and German bunds are definitely in that category. That's why the Germans can afford such negative rates, they have a captive audience.

  • A rate of -0.021 is not cheap "parking" either. – mootmoot Jun 28 '19 at 14:42
  • It's unclear to me why you think you can't deposit several million euros into a bank account. You may be correct, but I'm not aware of any reason why you couldn't. – ChrisInEdmonton Jun 28 '19 at 14:47
  • @ChrisInEdmonton: Mostly because the bank has to pay for the necessary reserves, and it's not going to earn much interest from loaning it to others. Of course, for a fee, it can be arranged. And if you're an active customer and they're earning money from you in other ways, it won't be a problem either. – MSalters Jun 28 '19 at 14:52
  • Good point, I just assumed from my point of view that there is no immanent need to diversify because I simply don't have that much, but not without reason there are a bunch of people whose day to day job is just to manage money. And the risk factor has also to be considered as you mentioned. Thanks even though I can't verify this IS the answer, I guess it comes close to it. I will wait a bit though, to mark it as such, maybe someone else wants to answer also. – mayen Jun 28 '19 at 17:12
  • After second though, I agree this is a major way of parking huge funds: the market usually has enough takers to unload the bond to with similar rates. – mootmoot Jun 28 '19 at 18:22

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