Comment: Choosing to spend more to ensure the safety of U.S. Treasury bonds reflects investors' loss of confidence.

According to data, the phenomenon of negative interest rates has appeared in short-term government bonds in the United States, and it has spread to nine-year government bonds in Japan. Germany is even more rare in that the entire government bond yield curve is below zero interest rates. Investors are willing to sacrifice principal to seek safe-haven assets.

Scale of Negative Yield Government Bonds on the Rise

Sacrificing Principal to Seek Asset Protection

According to Larry Cermak, Research Director at The Block, investors have lost confidence in the current market. They are unwilling to trust corporate organizations or commercial banks and only trust the government. Therefore, they choose to store their assets in government bonds, even if extensive purchasing leads to negative interest rates. Investors are willing to sacrifice small gains for asset security:

"In the current market environment, if you have a lot of money, you will not find a safe place to store it. If a bank fails, the maximum amount usually insured per account is only $250,000. You also wouldn't choose to keep your money in securities (or most other assets) because their values are declining. In short, investors have lost confidence in the current market."

Why? Because if you have a lot of money, you have nowhere to store it right now. Bank accounts are generally only insured for up to $250k. You can’t store it in equity (or most of other assets) because all of their values are tanking. It shows no faith in the current market

— Larry Cermak 🫡 (@lawmaster) March 24, 2020

#Supplementary: Yield = Fixed Maturity Yield / Current Bond Price; the higher the bond price, the lower the yield.

If you spend 100 yuan to buy a one-year bond, and after one year, you receive 5 yuan in interest, the yield is 5%.

Further Reading

• During the spread of the Wuhan coronavirus, which hedge assets performed the best?
• Is Quantitative Easing a Turning Point? BitMEX: "Rate Cutting Battle" by Central Banks Worldwide Will Drive Bitcoin to $20,000 by the End of the Year

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