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I noticed that german bonds offer negative yields, as you can see in this table.
My question is, considering Germany is returning less money than received, does that mean the sovereign debt is decreasing by selling bonds?
Thanks in advance!

  • Nope. Most government bonds are mean to funds research and infrastructure development. Innovation & economy that follows should create jobs and business revenue, which the government can collect more tax to offset the debt. German government issues the zero yield bond because they expect market demands for a secure bond that will not vaporise : money.stackexchange.com/questions/60418/… – mootmoot Aug 29 at 12:41
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The act of issuing bonds will always increases the debt of the issuer. Debt is the "amount of money borrowed by one party from another" any increase to what is owed always increases the debt, since debt only looks at what is owed, not what is owned. Debt does not consider assets.

If we look at a larger picture, an issuer can lower their overall debt by issuing new bonds and using the proceeds to pay off other debt with higher yield, however this can be done by regardless of the new bonds having a positive or negative yield, so long as the new bonds yield is less than the bonds being retired and the issuer is not accumulating additional debt in the sale.

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Consider a case where the bond offers no yield at all (zero). If the sovereign debt in the negative yield case decreased, it would mean that the zero-yield bond has no effect on sovereign debt at all. That is non true. What stays constant in the zero yield case and decreases in the negative yield case are the interest payments.

In the long run, a heap of negative yield bonds where the money is not used at all, would reduce the debt (when the bond is paid back). Though, Germany in that case just gets paid for safekeeping of the investors' funds.

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