Re:Entire German bond yield curve back in sub-zero territory
by second--shift on Tuesday August 03, 2021 @03:22PM
(#28053038)
The fundamental problem with your hypothesis is the time-value of money: overnight deposits can be moved around, well, overnight, but a 30yr bond (for the bondholder, ignoring secondary markets) locks up capital for decades. A bondholder can't take advantage of future preferential interest rates when their capital is already locked up in low-yielding bonds.
This is why bond price and bond yields have an inverse relationship.
My understanding is that banks get negative interest on deposits in the banking system over night from many European central banks. So if you pay say -0.x% on deposits then 1.85% over 30y is a bargain.