China sells Negative-Yield Bonds

China sells Negative-Yield Bonds

Part of: GS Prelims and GS-II – International Relations & GS-III – Economy

In news

• Recently, China sold negative-yield debt for the first time, and this saw a high demand from investors across Europe.
• As yields in Europe are even lower, there was a huge demand for the 4-billion-euro bonds issued by China.

Important value additions 

• Negative-yield bonds 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.
• Negative-yield bonds attract investments during times of stress and uncertainty as investors look to protect their capital from significant erosion.
• At a time when the world is battling the Covid-19 pandemic and interest rates in developed markets across Europe are much lower, investors are looking for relatively better-yielding debt instruments to safeguard their interests.