China Issues Negative-Yielding Debt for the First Time



Central Banks, Asset Managers, and Others Invest in China’s Debt

China has raised about $4.7 billion in its first negative-yielding debt. Through the deal, which was euro-denominated, the Chinese government issued five-, 10-, and 15-year bonds. The five-year bonds were priced at negative 0.152%. The 10- and 15-year bonds were priced with positive yields of 0.318% and 0.664% respectively. Investors from Europe, Asia, and the US rushed to snap up this debt. These investors included central banks, sovereign wealth funds, and global asset managers. European investors were particularly interested in China’s five-year bonds because some other government debt in the region is even more negative. For example, yesterday the yield on five-year German bonds was negative 0.749%.

Negative-yielding bonds are somewhat rare, and tend to be purchased as safe-haven assets during times of economic uncertainty. When a bond has a negative yield an investor receives less money when the bond matures than what they paid for it initially.

China’s Economic Recovery

China’s economy grew 4.9% during the third quarter compared to the same period a year ago, moving closer to its pre-pandemic growth trajectory. China is the only major economy expected to see growth this year as the US, Europe, and other parts of the world continue to experience economic downturn, shutdowns, and extremely low interest rates.

Central banks in many parts of the world have slashed interest rates in hopes of spurring consumers and businesses to make purchases, hire workers, and stimulate the economy. These short-term interest rate cuts have weighed on longer-term yields. They have also caused investors to worry that governments are concerned about their countries’ economic health.

Bonds With Negative Yields Gain Popularity

Though it might seem like a strange choice for a lender to pay a borrower, some investors see negative-yield bonds as being safer than putting money into the stock market or other investments at the moment.

As of the end of October, there was $13.4 trillion invested in bonds with negative yields around the world. Over the summer, this number hit $17 trillion. Even if these negative yielding bonds do not generate coupons, they are in demand for their perceived safety and liquidity. Investors have the ability to swap them for cash quicker than some other assets at a fair price.


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