Negative Yield Bond refers to a debt instrument where the investor receives less money at maturity than the amount initially invested, even after accounting for coupon payments. In other words, investors are effectively paying the issuer to hold their money. This unusual scenario typically arises in times of economic uncertainty or when central banks keep interest rates extremely low.

Such bonds often appear in advanced economies like Japan, Germany, or Switzerland, where investors prioritize capital preservation over returns. When demand for government securities rises sharply, their prices increase, and yields fallósometimes into negative territory. For example, if a bond with a face value of ?1,000 trades at a premium of ?1,050, but the coupon and maturity payments total less than ?1,050, the yield becomes negative.

Investors may still buy negative yield bonds for reasons such as safety, liquidity, regulatory requirements, or expectations of further rate cuts. Institutional investors like pension funds, insurance companies, and central banks are typical participants in these markets. For them, a small guaranteed loss is preferable to potential larger losses elsewhere or currency risk from holding foreign assets.

However, negative yields indicate a distorted interest rate environment and signal pessimism about future economic growth or inflation. Retail investors should understand that such bonds do not suit wealth-building goals, as the real returns are negative after inflation and taxes. Instead, they serve as a tool for preserving capital or meeting regulatory mandates rather than generating income.

In summary, negative yield bonds highlight how global monetary policy and investor behavior intertwine during uncertain times. While they reflect confidence in issuersí safety, they also underscore concerns about growth and the search for secure, stable investments.