THEY are the aristocrats of the corporate sector. Some companies are so favoured by investors that their bonds trade with negative yields: investors are buying their debt at a price that exceeds the value of the interest payments and principal. (Many government bonds offer negative yields these days, too. But odd as that is, governments at least tend not to go out of business altogether, and so are often thought to be better credit risks.)

In part, the spread of negativity reflects the impact of monetary policy: central banks have imposed negative rates on the reserves commercial banks keep with them. Other interest rates have been dragged lower in tandem. But it also reflects the requirement for banks and insurance companies to own highly rated debt for regulatory reasons. As a result, there is a lot of demand for the debt of companies with the highest credit ratings, regardless of the returns on offer.

According to Markus Stadlmann of Lloyds, a British bank, there are some 355 corporate-bond issues with negative yields at the moment (with many trusted companies represented several times over via different issues). The table above...Continue reading