Why buy bonds at -0.01%?

Do you remember during the European debt crisis, which peaked around 2012, when the PIGS (Portugal, Italy, Greece & Spain) were being bailed out by the European Central Bank?

In the chart below, you can see the Portuguese 10 year Government Bond was yielding 14% at that time.

I didn’t have the inclination, acumen or guts to buy those bonds then and nor since.

But today, that bond has traded at a negative yield of 0.01%.

How times have changed.

Some investors have felt that such a yield is so ravishing that they decided to buy the heck out of those bonds to the point where they will happily receive a zero yielding return.

I can’t figure this out and nor do I have answer.
It’s simply an astonishing occurrence.

December 9, 2020
by Rob Zdravevski
rob@karriasset.com.au