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.
