China sold its first negative-yielding sovereign bond on 18 November 2020. Yield on the

five-year, 750m bond was priced 0.3 percentage points above the benchmark mid swap

rate of minus 0.45 per cent, offering investors an effective interest rate of minus

0.15 per cent. The rest of the 4bn euro-denominated debt offering was composed of a

10-year 2bn bond and a 15-year 1.25bn bond, carrying yields of 0.318 per cent and

0.665 per cent, respectively.

What does a negative-yielding bond mean? Why would investors buy a negative-yielding

bond? What would you choose if you were an investor in the market? Briefly explain.