Invest or speculate

Spanish bond with a maturity of fewer than 5 years 

 Spanish bond with a maturity of less than 5 years 


The financial investment consists of contributing money, in the form of capital or a loan, to a company or institution in exchange for a payment. The investor, the one who buys shares or bonds issued by a company, expects that his money will be used efficiently in an economic activity, which will generate sufficient profits so that, through dividends or interests, his investment can be remunerated.

When you lend money to another, expect to be paid with an interest. Nobody, in their right mind, would lend money to another knowing, and accepting in advance, that he would not receive any retribution. And much less if you were assured that, not even the entire amount of what you lent would be returned. This principle, which seems obvious in the real economy, is sometimes not met in the financial markets. Knowing it or not, directly or indirectly through investment or pension funds, millions of people are counted, who are lending their money to governments and companies in exchange for less than nothing. Who buys a Spanish bond with a maturity of fewer than 5 years is accepting a deal for which the treasure agrees to return less money than it has received. If the bonus is from the German treasury, the negative return extends to any term of fewer than 12 years.

Lending money

Lending money



Lending to a government is, in principle, a very safe investment: after all, you have a machine to print bills. Lending money to a company, which does not have that printer, already has a somewhat higher risk. Despite this, some large European companies are already issuing bonds with negative returns in short terms. And, as a whole, in medium or long terms, they barely pay interest. The average profitability offered by the bonds of the companies of the Euro Stoxx 50 for a term of five years is below 0.4%. Very little room for any small mishap.

Why are negative or miserly returns accepted? Probably, because those who buy the bonds do not think about the interest that is paid, but about the short-term price that that bond can mark, day by day, in the markets. You already know that accepting that they do not pay you interest and return you on the due date less money than you have borrowed is absurd. But they also know that in the market there are many people like them, who may be speculating, that, before the expiration of the bond, there will be another who will be willing to commit to losing something more than them. Because he will be convinced that he will not be the last to do it.

The same companies that barely pay, on average, 0.4% annual interest to five years to their lenders, are paying their shareholders with annual dividends that represent more than 4% of the current market price of the shares. It is not a balanced situation. At current prices, buying stocks is investing and buying bonds, speculating.