Investors Traders: Bond Market and Bagholders Investors

investors traders: Opinion If the stock market is irrational, what do you call the bond market Nonetheless analysts say there are reasons for investors and traders to buy subzero-yielding bonds, according to Market Watch. Here are just a few of them Bagholders Investors who scoop up negative-yielding bonds are betting on the value of the securities to keep rising, in effect, wagering that there are other bagholders. Textbook finance theory, itself, has struggled to explain why investors might want to tie their money in debt that if held through the entirety of its existence would give back less money than what had been invested, said Kathryn Kaminski, portfolio manager at Alpha Simplex. With the European Central Bank widely expected to restart their asset purchasing program, European bond-buyers could be relying on the central bank to hoover up their portfolios of negative-yielding securities. In July, an auction for 4 billion euros of 10-year German government bonds TMUBMUSD10Y, -4.88% sold at a negative yield of 0.26%, but at a premium price of 102.6 cents to the euro. Although investors buying bonds with subzero interest rates are, in effect, paying for the privilege to hold on to an investment, that cost can be more than offset if the security's price rises. (news.financializer.com). As reported in the news.