Context:

China’s first-ever sale of a negative-yield bond drew strong demand from investors seeking exposure to an economy that is returning to pre-pandemic growth rates.

Negative-yield bonds

• Negative-yield Bonds are debt instruments that offer to pay the investor a maturity amount lower than the purchase price of the bond.
• They are fi nancial instruments that cause purchasers to lose money.
• These are generally issued by central banks or governments, and investors pay interest to the borrower to keep their money with them.
  • They are usually issued in countries with low or negative interest rates and bought by investors who want to keep money safe or avoid worse yields.
• Negative-yield bonds attract investments during times of stress and uncertainty as investors look to protect their capital from significant erosion.
• Current yield: Current yield is the amount that will be paid in interest on a bond over a oneyear period, expressed as a percentage of its face value.
• Yield to maturity: Yield to maturity is the amount that will be paid from now until the bond expires, also expressed as a percentage of its face value.