Yesterday, the FT reported that Italy sold 2-year bonds at a negative yield -- joining Germany, France, and Switzerland as countries where the rate to borrow money is negative. A negative yield means investors are paying the Italian government for the right to lend it money, and remember, Italy has one of the highest debt to GDP ratios out there.
So here’s the quote from Marco Brancolini at RBS on why investors might buy Italian bonds: “If the deposit rate is minus 0.2 per cent and the yield on German two year bonds is minus 0.35 per cent then you can see why investors might buy two year Italian debt at minus 0.023 per cent.” A strange world indeed . . .