Witwenmacher – How Low Can 5-Year German Bunds Yields Go? – Horseman Capital

Witwenmacher - How Low Can 5-Year German Bunds Yields Go? by Russell Clark - Horseman Capital Management

The idea of owning a negative yielding bond would seem ludicrous to most investors. By definition you are going to receive back less than you are going to pay. However at the moment we find large parts of the European bond market have negative yields out to 5 years.

The European bond market is a very interesting market at the moment. Prior to 2007 all European sovereign bonds traded very similarly. Since 2011, European bonds have diverged despite the best efforts of the ECB. The received wisdom is the difference between bond yields reflect differing chances of default.

However, the Brexit vote and...