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Japan's negative yield bond explained
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Smartguy-in-sf
Japan needs to spark inflation by taking bold and dramatic action!!! The answer is so incredibly simple... I am shocked that nobody as of yet has advocated for this! BOJ needs to take many wheelbarrows full of Japanese governent bonds to a public ceremony and set them on fire!!! The media would broadcast it for the world to see! This bold action, which retires Japanese public debt, is certain to spark the inflation that Japan so badly needs.
badsey3
With the negative compounding interest you will continually lose more on these negative bonds. As a speculator that really doesn't matter but as a long-term bond holder these "negative assets" are a hot potato of investing. =Very few normal investors will want to hold these negative compounding assets to full term.
Maybe Abe has new tax laws coming for these negative bond holders.
Seirei Tobimatsu
buy nz dollar , earn 3% interest over 5 years then wait for yen to fall below bought rate?
ThonTaddeo
It is exactly backwards, though given Agence France Presse's full-on Abe-cheerleading ever since he got elected, I am hardly surprised.
As you see, they will make money if the yield becomes even more negative than it is now; for example, selling it onward to a party who might otherwise be stuck buying a bond that yields -0.050%. They would pay above par for the bond and that difference would offset the -0.035% per year that the first bond buyer had been "paying" to hold it.
fxgai
Another shocker from AFP.
The key point is that if you know someone else (like the BOJ) is going to buy the bond off you at an even bigger loss than what you are paying for, then you can still make money when you sell the bond on, rather than hold it to maturity.
The ostensibly desired effect was to have them loan the cash, not spend it. No depositor expects their bank to spend their cash, they expect their bank to look after the money and eventually give the money back when requested.
That's the ostensible purpose, but it would seem the true purpose is to prevent the direct bankruptcy of the Japanese government.
That seems backwards. They can make money if the yield goes down further (= bond price goes up further).
On the outstanding bonds that were issued before yields went negative, yes. If the MOF issues new bonds now though, they will be able to issue with a negative coupon perhaps?
mr_jgb
BOJ Kuroda needs to bring out the Boozoka.
Firm & huge & fierce FX interventions with side benefit of building up more FX reserves for further strategic strength; it's free while the Yen is too strong. Kill 2 birds with 1 stone.
Huge increase in buying of EFT stocks limit.
The panic rout needs to be reversed. Element of surprise and punish speculators hard.
Economically continue to promote and make Japan the tourism centre of Asia. Japan can have 100 million tourists a year; a very big boost to the economy.
NckHmml
I am confused, somebody please tell me I am not alone.
100,000 yen at -0.035%, somehow ends up at 3,500 yen? what math genius has been working here?
If I were to get the Greek 10 year with the same kind of logic, would I get my money back with in ten fold?
Now I am not sure how bonds work, but I expect something like "100,000 * -0.035% = 35" as -0.035% is the same as multiplying by -0.00035 as 1 = 100% (note the '%' sign, in the article too)
CH3CHO
AFP should know the difference between the coupon rate and the yield of a bond. The yield has fallen below zero, but the coupon rate is still positive.
ozziedesigner
= buy gold