Negative interest rates take investors into surreal territory

[John Hjorth]

Thank you for the explanations & elaborations, Spekulatius & Cigarbutt.

[Cigarbutt]

i came across the following while finishing a review of the rental and servicing of uniforms market.

https://www.bloomberg.com/news/articles/2020-05-25/a-0-0000148-yield-on-bond-sale-in-japan-is-exciting-investors?srnd=markets-vp

TL;DR version: It's a Japanese agency (student financing) that just issued bonds at a minuscule yield (0.0000148%) and the positive yield (!) got investors "excited" resulting in excess demand because the agency had issued negative (barely) yield debt last year.

Using a USD analogy and a pension funding point of view, putting aside 1M in such debt would procure 15 cents (rounded) per year. To fund one Starbucks latte per year would require setting aside 30M.

 

The rental and servicing of uniforms industry is interesting and has a future. Cintas (CTAS) for example has pulled all the right levers to improve all lines from top to bottom and even borrowed cheap debt to buy 1B of stock in 2019. A conclusion is that the return from holding such security is very likely to be positive over the long run. However a satisfactory return (IMO) is possible only if the Japanese debt example above makes sense.