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Friday, July 06, 2012

You think interest rates are low here? How does a negative interest rate sound to you?

The interest rate on German 2 year bonds is NEGATIVE!  The rate is -0.013%.

They will guarantee to pay you back LESS than you put in, and people are buying into it.

From the Wall Street Journal:
  investors buying the bond today are agreeing to get paid back less than their investment, locking in a loss. Usually, this sort of thing is only done when investors are acutely worried about getting their money back. In that context, locking in a slight loss might look like a better option than keeping yourself exposed to a possibly giant loss some where else. 

This is not a good sign.

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