Why Are People Buying Bonds with Negative Yields?

Bloomberg reports an astonishing bit of interest rate news from France. Mark Gilbert reports,
French utility Veolia Environnement SA is one of a handful of low-rated borrowers – assessed at BBB or lower by Standard & Poor’s – with fixed-rate debt repayable in three years or longer that trades at yields below zero in euros.
Fleckenstein Capital LLC put it this way,
Sacr BBB-leu!
Yesterday a Parisian BBB-rated company (i.e., quasi junk) issued $500 million in three-year notes yielding -0.026%.
We have been peppered with so many absurdities, nothing seems absurd anymore, although you can be sure when folks look back at this period, they will wonder, “What were they thinking?” and the list of examples will be quite long.
One wonders how this could be. As Guido Hlsmann concluded in his QJAE article ‘The Theory of Interest,’ an acting man earns money interest when his ‘originary interest causes a positive spread between the money proceeds from selling his product and the money expenditure on the related factors of production.’

This post was published at Ludwig von Mises Institute on November 21, 2017.