Swiss bonds are the new Swiss banks.
Both, you see, are super-safe places to park your money, so much so that people are willing to pay to keep it there. Now think about this for a minute. It shouldn’t be true. Borrowers usually have to pay lenders, not the other way around, to borrow money. That’s something we like to call “interest.” But it’s not true in the topsy-turvy world we live in today, where investors are lining up to pay the Swiss government for the privilege of lending it money for ten years. Or, in finance-speak, bond yields are negative.
This isn’t really new, though, so much as Europe’s new normal. As the Financial Times points out, €1.2 trillion, or $1.4 trillion, of eurozone debt has negative yields that mean lenders are paying borrowers. But what it is new is just how long people are willing to pay governments to borrow. At first, they only did so for 1-or-2-year bonds. Then, in a sign of how dysfunctional Europe’s economy still is, investors started paying Germany to borrow for five or six years. But now, as you can see above, Switzerland has beaten everyone else to be the first to have negative ten year borrowing costs, at -0.2 percent. And by “first,” I mean in history. This has never happened before.