Don't Be So Negative Investors betting on inflation are doing
strange things to the bond market. On Monday, the U.S. Treasury
sold $10 billion in government bonds to investors who, if
current conditions prevail, have agreed to lose money. For the
first time ever, the Treasury sold debt with a negative yield.
Does that mean that the investors are paying the Treasury to
hold their money? And if so, why would they do that? The answer
to the first question is no—they aren't paying Treasury for
anything but the bonds, though they could lose money on the
deal. And the answer to the second is that they're betting that
inflation will rise. To explain, let's run through some bond
basics. The negative yield resulted from the bond's specific
cocktail of interest payments (its coupon), price (what
investors paid for it at auction), and its expected return on
investment (its yield, a function of the coupon and price, and
inversely related to the price). In a bond auction, the Treasury
takes investors' cash, borrowing doll