The idea of a negative yielding bond goes beyond counter intuitive; this is teetering on insanity! Just image the reaction you’d get if you told somebody 30 years ago that people would be paying governments to accepts their loans, and not the other way around?!
Think about it this way: when you loan somebody money, not only is there a risk of default, but there is also an opportunity cost — meaning you risk missing out on other potentially better investments in the future because your money is tied up somewhere else.
Granted, the risk of default is extremely low when you buy a government bond, but nevertheless, there still exists an inflation risk. Over a long enough period of time, currency dilution has the potential to significantly reduce the real tangible value of your loan, which tends to get underestimated by investors.
In 1966, Carroll Quigley — a highly respected historian at that time — took note of this in his banned book, “Tragedy and Hope”.
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