Question

It may seem odd, but why would anyone buy bonds if they have a negative interest rate?

Choose one or more:
A. People who buy these bonds wish to help the government pay down debt at a lower cost.
B. Some pension funds are required to keep a portion of their portfolios in government bonds.
C. Government bonds are almost riskless.
D. The prices of alternative "safe" assets like gold do not change very much.

Answer 1

People may buy bonds with negative interest rates to help the government pay down debt, pension funds may be required to invest in government bonds regardless of interest rates, and government bonds are considered low-risk investments.

Step-by-step explanation:

Buying bonds with negative interest rates may seem odd, but there are a few reasons why people might choose to do so:

1. People who buy these bonds wish to help the government pay down debt at a lower cost. By purchasing bonds with negative interest rates, individuals can contribute to reducing the government's debt burden.
2. Some pension funds are required to keep a portion of their portfolios in government bonds. Even if these bonds have negative interest rates, pension funds are obligated to invest in them as part of their investment strategy.
3. Government bonds are almost riskless. Since the government is virtually certain to pay off the bond, even with a low interest rate, some investors may still prefer the safety and stability of government bonds over other investments.

Despite the negative interest rate, these factors make bonds an attractive investment option for certain individuals and institutions.