Yes, to the extent that the government doesn’t guarantee deposits you’re right. A deposit would have less security than a government bond, presumably. Although I could envision a scenario in which a private bank made good on its deposits while a profligate government was at the same time giving every bondholder a “haircut” when the bonds matured.
Actually, though, a good part of the reason for the negative yield might be due to a market mania of sorts. Just as people pay astounding prices for stocks that turn out to be worthless shortly thereafter by chasing a stock (or even a house) all the way to the top, sure that they’ll be able to sell to a higher bidder, some buyers no doubt expect to sell the bonds to others at an even higher price (and an even greater negative yield) at some time in the near future.
For example, a large portion of government bonds sold at auction in the U.S. are usually purchased by dealers intending to resell the bonds. That could be the case in Germany as well. I don’t know though.
I continue to think that this is just another tulip mania that will end very badly for those who end up holding the bonds when the mania ends.
“Tulip mania.” Understand the reference and the apt picture it draws of frenzied buying and selling.
I wonder what the Dutch is for:
“Where were you when tulips turned back into ordinary flower bulbs?”
Thanks for taking time to post your insightful replies.