DEFINITION of 'Negative Bond Yield'

A negative bond yield is an unusual situation in which issuers of debt are paid to borrow. At the same time, depositors, or buyers of bonds, pay a cash flow instead of receiving interest income.

BREAKING DOWN 'Negative Bond Yield'

Bonds trading in the open market can effectively carry a negative bond yield if the price of the bond trades at a sufficient premium. Remembering that the prices of bonds change inversely with a bond's yield, the higher the price of a bond, the lower the yield. At some point, the price of a bond can increase sufficiently to imply a negative yield for the purchaser.

 

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