1: - This chart shows the yield

2: on the German government's 30-year bonds

4: over the past few months.

6: You'll notice something unusual happened in early August.

9: The yield dropped below zero.

13: A yield is the return investors receive on a bond.

17: A negative yield is the opposite, meaning investors

20: are receiving less money than they originally paid.

23: Negative yields are a relatively new feature

26: in the world's bond markets, but they're appearing

28: with increasing frequency.

30: Globally, around $16 trillion worth of bonds

33: currently carry a negative yield.

36: Bonds are one of the safest investments on the market.

39: They're staples of many investment portfolios,

41: from pension funds to retirement accounts.

44: Investors like them because of their reliable returns.

48: So how did some bond yields go negative?

51: And why would investors keep putting their money

53: in assets with negative returns?

62: To understand negative yields,

64: you need to understand how bonds work.

67: Bonds are a form of debt that governments

69: and companies issue for various lengths of time.

71: A bond's lifespan can range from a few weeks

74: to a few decades.

76: Bond issuers make regular interest payments

79: to bond holders over the asset's lifespan.

82: This is known as the coupon rate.

85: But bonds are often bought and sold on the secondary market.

88: Their prices fluctuate, which affects

90: what an investor can expect to earn.

93: The yield is a calculation of how much an investor

95: can expect to make from holding onto a bond bought

98: at a particular price for a particular length of time.

102: The yield of a bond is inversely related to its price.

105: High demand in the bond market drives up prices

108: and drives down yields.

110: This is largely why yields are negative.

113: Right now, the bond market

114: is experiencing unusually high demand.

117: There are a few reasons for this.

120: The first is that investors have grown

122: increasingly concerned about the lack of growth

124: in the global economy.

126: Amid low inflation, political uncertainty,

128: and trade disputes, investors are putting more money

131: into safer assets, like bonds.

134: The second is that several central banks around the world

137: have set their interest rates below zero.

140: Central banks are banks for commercial banks.

142: So when they set negative interest rates, commercial banks

145: must pay them for the privilege of holding their money.

148: This incentivizes commercial banks

150: to lower the interest rates they charge to.

152: So far, commercial banks have been reluctant

155: to pass that negative rate to average consumers,

157: but some have passed on the cost to companies

160: and large institutional investors.

163: Negative rates give investors an incentive to buy bonds

165: rather than park their money at a bank.

167: This drives up demand.

170: These factors have pushed bond prices higher

173: and driven down yields, so much so that they are now

175: in negative territory and, in some cases, even below

179: the negative rates set by central banks.

182: So why would investors continue to buy bonds

184: with negative yields?

186: Well, if demand continues to rise, buying now means

189: potentially selling bonds later at a higher price.

193: This can help offset losses in the short term,

195: but the long-term implications of negative yields could

198: mean lower returns on pensions and retirement accounts,

201: meaning workers might have to save more and work longer.

205: Negative bond yields, and negative interest rates

207: in general, are viewed as a short-term remedy

209: to get economies moving.

211: But with the footprint of negative rates getting deeper

213: and wider, investors worry that they may be less

216: of a temporary fix, and more of a permanent fixture

218: in the market.