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What Is Negative-Yielding Debt?

You’re scratching your head.

Don’t worry — TheStreet’s got your back.

Negative yielding debt:

It’s when you, the investor, pay interest to own a bond.

You may ask, how can that be?

Let’s start with an analogy.

You lend someone your phone charger. You expect your charger back (the charger is your money), and in the mean time, you expect the person to be extra kind to you (the kindness is your interest collections).

Well, usually, when you buy a bond, you put down your money, or your principle, to own the bond. Then you expect the debtor (the borrower) to pay you interest before you get your principle back.

Negative-yielding debt works inversely.

To see how and why that is, watch the video above.

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