Who holds negative yield securities and why?

Author: Michael Schmidt (Goethe University, Bundesbank)

Title: Who holds negative yield securities and why?

Abstract: This paper uses microdata at the security level to investigate which investor sectors show the highest demand for negative yield bonds. Furthermore, I use bank and investment fund level data to examine the motives behind negative yield investments. The results suggest that banks are the main investor in such assets and keep them as liquidity buffer, especially when they operate a more complex business model. Bank regulation does not push negative yield holdings. Investment funds use negative yield assets as a liquidity buffer in order to cover investor redemptions.