Read in the Washington Post that The Treasury auctioned inflation-protected bonds at a negative 0.55 percent Monday, the first time the government has sold bonds at a negative yield.
Here -> http://www.washingtonpost.com/wp-dyn/content/article/2010/10/25/AR2010102504347.html
I am no economist so this doesn't make sense to me.
Does this really mean that people buy bonds which will promise something less than the face amount? Is it like taking a loan of 100,000 guaranteeing that repayment would be something less than that?
Hope Tim Hartford or Steven Levitt can explain to lay people like me. Or can you, please?
Oct 27, 2010 - An Update
On a whim, I had mailed Steven Levitt. And got a prompt reply:
"These bonds are inflation adjusted. So if inflation is 10% and you have a $100 bond, then you get back $109.45. still better than having pure cash. If,on the other hand, inflation is zero, then you wish you had cash."
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1 comment:
Avalo vettiyava irukaru Mr Steven Levitt
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